SoftBank raises Arm-backed loan to $25B to fund AI spree

SoftBank Group has expanded its margin loan backed by shares of chip designer Arm Holdings ↗ 4.74% by $5 billion to $25 billion, Bloomberg reported on Friday, as founder Masayoshi Son taps every available lever to finance an escalating wave of artificial intelligence investments.theedgemalaysia+1

The Japanese conglomerate renegotiated terms and signed a deal with creditors this month, according to people familiar with the matter cited by Bloomberg. It marks the third time SoftBank has upsized the facility since it began as an $8.5 billion loan in 2023, growing to $13.5 billion in 2024 and $20 billion last year.theedgemalaysia

Lender Appetite Exceeds Expectations

Strong demand from lenders helped push the deal beyond SoftBank's initial target. The company had sought to increase the facility by $3 billion to $5 billion but received roughly $7 billion in commitments, buoyed by a 142% surge in Arm's share price this year. The loan remains priced at about 225 basis points over the Secured Overnight Financing Rate with a 25-basis-point credit adjustment spread, and it matures in September 2027.streamlinefeed+1

As of May, the loan was secured by 769 million Arm shares representing a 72% stake in the chip designer. SoftBank owns nearly 90% of Arm overall.theedgemalaysia

An AI Empire Built on Leverage

The expanded borrowing facility feeds a broader strategy that has seen SoftBank commit nearly $65 billion to OpenAI, including a $30 billion follow-on investment announced in February. Other recent deals include the $5.4 billion acquisition of ABB's industrial robotics business and an agreement to acquire data center-focused investor DigitalBridge Group ↗ 0.13% for roughly $4 billion.digitalbridge+2

To manage the resulting debt load, SoftBank has been replacing short-term borrowings with longer-dated instruments. The company repaid this week the entire $25.9 billion outstanding balance on a one-year loan that funded its OpenAI investment, and last month secured a $10 billion two-year loan backed by its OpenAI stake from lenders including Apollo Global Management ↘ 0.44%.theedgemalaysia+1

Investor Unease Grows

The aggressive borrowing comes amid rising concern among investors. OpenAI CEO Sam Altman said last week that the startup will not pursue an initial public offering in 2026, news that weighed on SoftBank's stock. Among other major AI spenders, Oracle ↗ 0.82% faces questions about its exposure to capital spending risk, and Meta Platforms' ↗ 0.84% free cash flow is projected to turn negative in the third quarter.investing+2

SoftBank declined to comment on the loan increase.