SoftBank CDS Widens, Rakuten Narrows as Credit Views Diverge

Core Viewpoint - SoftBank Group Corp.'s credit-default swaps (CDS) have reached their highest level since April, indicating increased investor caution regarding the company's debt-driven growth amid rising global competition [1]. Group 1: SoftBank's Financial Movements - SoftBank's five-year CDS rose to approximately 302 basis points, up from around 280 basis points the previous day, reflecting market concerns [2]. - The company is actively raising funds, having set terms to sell ¥500 billion ($3.3 billion) in retail bonds with a 3.98% coupon, with part of the proceeds aimed at repaying a bridge loan related to its investment in OpenAI [3]. - The spreads on SoftBank's dollar- and euro-denominated bonds issued in July have widened as investor caution increases [3]. Group 2: Market Comparisons - In contrast, Rakuten Group Inc. has seen a modest narrowing of its CDS spreads, decreasing to about 200 basis points from an August high of around 250 basis points, as the company reduces its debt load to enhance its credit profile [4]. - The rise in SoftBank's CDS may be influenced by several factors, including a decline in AI-related stocks, ongoing bond issuance, and concerns over its concentrated investment in OpenAI [5]. - Rakuten's strong performance in its financial businesses and its ability to issue subordinated bonds domestically are providing reassurance to the market [5].