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 turned cautious on the tech behemoth’s debt-fueled growth at a time of intensifying global competition.

The company, which has been unwinding positions to pay for a plethora of AI projects, from Stargate data centers with OpenAI and Oracle Corp. to robot manufacturing sites in the US, saw its five-year CDS rise to about 302 basis points on Thursday, up from around 280 basis points the previous day, according to data compiled by Bloomberg.

The increase comes as SoftBank intensifies its fund raising campaign. On Wednesday, the company set terms to sell ¥500 billion ($3.3 billion) in retail bonds with a 3.98% coupon. A portion of the proceeds will go toward repaying a bridge loan tied to the OpenAI investment. Spreads on SoftBank’s dollar- and euro-denominated bonds issued in July have also widened as investors turned cautious.

In contrast, Rakuten Group Inc., which has been reducing its debt load to improve its credit profile, saw a modest narrowing of its CDS spreads in recent weeks, data compiled by Bloomberg showed. The 5-year contract has shrunk to about 200 bps from an August high of around 250 bps.

The rise in SoftBank’s CDS may reflect several factors being priced in by the market, including the decline in AI-related stocks, the company’s continued bond issuance, and “concerns” over its concentrated investment in OpenAI, said Taketoshi Tsuchiya, chief executive officer at Fujiwara Capital Co.

By contrast, he pointed out that Rakuten’s solid performance in its financial businesses and its ability to issue subordinated bonds domestically are providing “reassurance” to the market.

(Updates with market comments from fifth paragraph)

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