Bloomberg reported on Friday that Japan’s SoftBank Group is planning to borrow a loan of up to $40 billion to fund its investment in the artificial intelligence company OpenAI, which would make the company the largest ever borrowing denominated in U.S. dollars.
It is proposed that the tenor of the bridge loan would be approximately 12 months, and the proposed bridge loan would be underwritten by four lenders, which include JPMorgan Chase, as per the report.
Bloomberg stated that the negotiations with banks are still in progress, and the ultimate terms might alter. The action highlights the aggressive ambition by founder Masayoshi Son to place SoftBank at the core of the global artificial intelligence boom.
SoftBank has invested more than $30 billion in OpenAI and owns approximately 11 percent of the company by the end of December, making the ChatGPT developer one of the biggest investments by the Japanese group.
To fund its expanding AI investments, SoftBank has divested assets such as its stake in NVIDIA, and OpenAI has been listed alongside chip developer Arm Holdings as one of the largest holdings of the conglomerate.
According to Bloomberg, S&P Global Ratings recently decreased the credit outlook of SoftBank due to the fact that the firm is likely to face liquidity pressures because of its heavy expenditures on AI investments.
The sheer amount of money being spent has made Wall Street nervous. S&P Global Ratings lowered SoftBank’s credit outlook from stable to negative this week.
S&P analysts warned that OpenAI is now one of the riskier assets in SoftBank’s portfolio, and the mounting debt needed to fund these bets is hurting the company’s financial flexibility.
The loan is projected to last for about a year. SoftBank is currently talking to banks like JPMorgan Chase to get the deal done. This cash is meant to act as a bridge, giving the company the immediate funds it needs to meet its huge investment pledges while it manages its other assets.
