SoftBank CDS Widens, Rakuten Narrows as Credit Views Diverge

(Bloomberg) — SoftBank Group Corp.’s credit default swaps climbed to the highest level since April as investors grew wary of the tech giant’s debt-driven expansion at a time of intensifying global competition.

The company, which has unwinded its positions to pay for a slew of AI projects ranging from Stargate data centers with OpenAI and Oracle Corp. to robot manufacturing facilities in the U.S., saw its five-year CDS rise to about 302 basis points on Thursday from about 280 basis points the previous day, according to data compiled by Bloomberg.

The increase comes as SoftBank intensifies its fundraising campaign. On Wednesday, the company set terms to sell ¥500 billion ($3.3 billion) of retail bonds with a coupon of 3.98%. Part of the proceeds will go towards repaying the bridge loan tied to the OpenAI investment. The spreads of dollar and euro denominated bonds issued by SoftBank in July also widened as investors acted cautiously.

By contrast, Rakuten Group Inc., which has reduced its debt load to improve its credit profile, has seen a modest narrowing of CDS spreads in recent weeks, according to data compiled by Bloomberg. The 5-year contract fell to around 200 basis points from its August high of 250 basis points.

Taketoshi Tsuchiya, CEO of Fujiwara Capital Co., said the increase in SoftBank’s CDS could reflect a variety of factors priced in by the market, including a decline in AI-related stocks, the company’s continued issuance of bonds and “concerns” about its heavy investment in OpenAI.

In contrast, he noted that Rakuten’s solid performance in financial businesses and its ability to issue subordinated bonds domestically provide “reassurance” to the market.

(Updates with market commentary in fifth paragraph)

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