SoftBank Group Corp. (SBG) will use a portion of the funds raised through the planned issuance of 1 trillion yen in retail corporate bonds "as capital for aggressive AI investments," CFO Yoshimitsu Goto said during an interview with The Yomiuri Shimbun.
The Japanese company said that the coupon rate is expected to be in the 4.3% to 4.9% per annum range and will be set on Friday.
The following is excerpted from the interview.
The Yomiuri Shimbun: Why are you going to issue corporate bonds targeting individual investors?
Yoshimitsu Goto: The Japanese retail (individual investor) market finds SBG's retail corporate bonds highly attractive. We have a history of over 20 years, following our first issuance in 2005, and the number of investors who understand the safety of these products has grown. As of the end of June, the number of holders had climbed to 980,000, and the bonds are traded in the market.
Yomiuri: Why are you raising funds from individual investors rather than institutional investors?
Goto: Japanese institutional investors each set upper limits on the amount they can invest based on SBG's credit rating. Therefore, it is difficult to raise funds on the scale of 1 trillion yen.
These retail corporate bonds will offer an annual coupon rate in the 4% range, making them a very attractive product in terms of returns. If you look at SBG's financial condition, you can see that it is safer than its credit rating suggests.
Yomiuri: What factors have made the plan to raise 1 trillion yen possible?
Goto: Sales schedules for retail corporate bonds are arranged separately with each securities firm. We asked each firm to provide their sales projections, and when combined, the total was on that scale. This reflects the continued willingness among Japanese investors regarding asset management. For those who view stock investments as carrying a risk of loss, these corporate bonds that offer an annual coupon rate in the 4% range are ideal for managing stable funds.
Yomiuri: How will the funds raised be used?
Goto: We will use 400 billion yen to redeem the 400 billion yen in corporate bonds issued in 2019. The remaining 600 billion yen will be utilized as capital for further aggressive AI investments.
Yomiuri: What areas will you focus on in AI investments going forward?
Goto: It will be in physical AI that SoftBank can play a role. This is because, once the AI infrastructure and technology are in place, physical AI is what will concretely transform people's life- and work styles. Humanoid robots, industrial robots, autonomous driving and the like will significantly change people's lives.
Yomiuri: Will the 1 trillion yen also lead to investments in physical AI?
Goto: It is crucial to secure sufficient financial resources to make successive investments in startups and other entities involved in physical AI. This will further expand the potential for SBG's future earnings and enterprise value to exceed expectations.
Yomiuri: What is your view on SBG's practice of maintaining a loan to value (LTV) ratio below 25%, with a cap of 35% in times of emergency in the financial market?
Goto: An LTV of 25% is too conservative, if anything. For example, if we have 1 trillion yen in assets and 250 billion yen in debt, the LTV is 25%. If market turmoil causes the value of our assets to fall by half, the LTV would rise to 50%, but even then, our liabilities would not exceed the value of our assets. From this perspective, too, we are highly conscious of the safety of our debt.
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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
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