SoftBank Group’s credit risk rises to a four-year high, as AI bets and acquisition rumors heighten leverage concerns
Due to increased market concerns over AI-related financing and potential large-scale acquisitions, SoftBank Group's credit risk indicator—the credit default swap (CDS)—has risen to its highest level in nearly four years.
According to Zhihu Finance APP, due to growing market concerns over AI-related financing and potential large-scale acquisitions, SoftBank Group’s credit risk indicator—Credit Default Swap (CDS)—has risen to its highest level in nearly four years. Market data compilation shows that SoftBank’s five-year CDS was quoted at 432 basis points on Tuesday, the highest since early November 2022. After breaking above 400 basis points a week ago, this indicator has expanded by more than 30 basis points.
Financial stress at the U.S. cloud computing service provider CoreWeave (CRWV.US) has brought attention to the mounting debt issues behind the AI investment boom, with SoftBank, one of the most aggressive capital deployers in the AI field, becoming a focus of scrutiny. This key computing power lessor within the Nvidia ecosystem now has debts and financial obligations exceeding $50 billion, and its five-year CDS spread once surpassed 1,100 basis points, with the market pricing in a probability of default above 60%.
At the same time, SoftBank is weighing an acquisition of U.S. security services giant Allied Universal. Combined with rising financing costs, the market’s focus on its financial pressure is intensifying. SoftBank is in the early stages of talks to acquire Allied Universal, whose equity is valued at up to $18 billion and which carries about $12 billion in public debt, giving a potential enterprise value of nearly $30 billion when debt is included.
Credit analyst Sharon Chen expects that in the fiscal year ending March 2027, SoftBank will have at least $6 billion in cash outflows, and further AI investments will intensify funding needs. In her report, she said SoftBank “will need to raise new funds for this deal,” and its loan-to-value ratio could approach the company’s self-imposed 25% ceiling.
SoftBank Group’s share price has performed weakly in recent periods, having dropped about 50% from its June high.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Europe’s largest asset manager Amundi tokenizes equity index fund on Ethereum
Apple plans to raise 7 billions USD to repurchase stocks, returning to the US dollar bond market after a year and a half.
Apple raised approximately $7 billion through this bond issuance, which is divided into seven tranches with maturities ranging from two to ten years. The longest tranche was initially priced at a spread of 80 basis points over US Treasuries. The proceeds from the bonds will be used for general corporate purposes, including stock buybacks, dividend payments, and capital expenditures. Analysts pointed out that shareholder returns are a higher priority than AI capital expenditures in Apple's capital allocation.
Crypto prices
More
