(Oct 20): SoftBank Group Corp’s credit risk, as measured by its credit-default swaps, has risen to the highest level in nearly four years as concerns grow over artificial intelligence (AI)-related funding and a potential large acquisition.

SoftBank’s five-year CDS stood at 432 basis points on Tuesday, a level unseen since early November 2022, data compiled by Bloomberg show. It has widened by more than 30 basis points since moving above 400 a week earlier.

Concerns over debt-fuelled AI investment have intensified as financial strains at US cloud computing services provider CoreWeave Inc put a spotlight on the sector’s mounting borrowing. SoftBank is also drawing scrutiny as financing costs rise and it weighs an acquisition of Allied Universal.

The last time SoftBank’s CDS was at this level in 2022, its Vision Fund business was posting heavy losses and the group was in defensive mode. Masayoshi Son, who described himself as “an aggressive person”, stepped back from earnings briefings as the company retrenched.

SoftBank’s CDS is the highest among major Japanese companies, exceeding second-ranked Nissan Motor Co’s spread by more than 130 basis points.

Bloomberg Intelligence credit analyst Sharon Chen sees at least US$6 billion (RM24.5 billion) of cash outflow from SoftBank in the year ending March 2027, with further AI investment adding to funding needs. SoftBank “would need to raise fresh funds for the deal”, while its loan-to-value ratio could move toward its self-imposed 25% ceiling, she said in a note.

SoftBank Group shares have performed poorly of late, falling about 50% from a June high.

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