SoftBank Group Corp.'s credit risk has surged to its highest level in nearly four years, with five-year credit-default swaps climbing to 432 basis points on Tuesday, the highest since early November 2022. The increase reflects growing concerns over AI-related funding demands and a potential large acquisition, with CDS spreads widening by more than 30 basis points since moving above 400 a week earlier.
The spotlight on AI investment debt has intensified following financial strains at US cloud computing provider Core Weave Inc., highlighting the mounting leverage behind the AI boom. SoftBank is also under scrutiny as financing costs rise and it weighs a potential acquisition of Allied Universal.
Bloomberg Intelligence credit analyst Sharon Chen projects at least $6 billion of cash outflow from SoftBank in the year ending March 2027, with further AI investment adding to funding needs. She noted that SoftBank "would need to raise fresh funds for the deal," while its loan-to-value ratio could approach its self-imposed 25% ceiling.
SoftBank Group shares have declined sharply, falling about 50% from a June high, underscoring investor unease over the conglomerate's aggressive AI-focused investment strategy and its impact on financial stability.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing