Apollo Global Management is in discussions with SoftBank Group about increasing a loan backed by assets held in SoftBank’s Vision Fund 2, with the proposed facility potentially rising to $9bn from its current $5.4bn, according to Private Equity Wire citing a Bloomberg report. The potential increase is being explored as SoftBank seeks additional financing tied to its substantial investment in OpenAI, according to the same report.
Potential facility increase from $5.4bn to $9bn
People familiar with the matter said the facility could rise to $9bn from $5.4bn, according to Private Equity Wire. The size of the potential increase has not been finalised, and the discussions may not result in a revised agreement, the report said.
Representatives for Apollo and SoftBank reportedly declined to comment, according to the report.
Background: Vision Fund 2 NAV loan originated in 2021
Apollo originally provided the net-asset-value (NAV) loan to Vision Fund 2 in 2021, according to Private Equity Wire. The financing was expanded by $900m last year to reach $5.4bn, the report said.
The publication described NAV lending as a form of financing that allows private capital managers and investment funds to raise liquidity against the value of their underlying portfolios. For SoftBank, the facility provides an additional source of funding as it commits increasingly large sums to artificial intelligence investments, according to the report.
OpenAI financing activity and other funding discussions
The potential loan increase comes as SoftBank continues to expand its exposure to OpenAI, the creator of ChatGPT, according to the report. SoftBank has committed approximately $64.6bn to OpenAI, and it has also explored additional borrowing against its OpenAI holdings, according to Private Equity Wire citing Bloomberg.
In August, SoftBank secured a $10bn margin loan backed by its stake in OpenAI from a group of lenders that included Apollo, the report said. The scale of SoftBank’s AI spending has increased scrutiny of its financing requirements and credit profile, according to the report.
Credit-default swaps on SoftBank rose to a three-year high this week, reflecting heightened investor concern over its exposure to OpenAI and broader questions surrounding AI-related risks, the report said. SoftBank has also held meetings with investors in New York regarding a potential overseas high-yield bond offering that could raise between $10bn and $20bn, according to people familiar with the plans cited in the report.
Vision Fund 2 activity and committed capital
Vision Fund 2 had more than $100bn in committed capital as of February, according to the report. Vision Fund 2 has made over 300 investments since its launch and has recently increased its activity in OpenAI, according to the same report.
Widely known context: NAV loans are commonly used by private funds to raise liquidity against portfolio value rather than selling underlying holdings, and they are typically structured with borrowing bases tied to the assets in the portfolio.
