Apollo in Talks to Boost SoftBank Vision Fund 2 Loan to $9 Billion

Apollo Global Management is in talks with SoftBank Group to significantly increase an existing loan to the Japanese conglomerate's Vision Fund 2 to $9 billion, up from its current $5.4 billion, according to a Bloomberg report citing people familiar with the matter.

Details of the Financing

The proposed deal involves a type of financing known as a net-asset-value (NAV) loan, which is secured by the assets held within an investment fund. This structure allows the fund to gain liquidity without being forced to sell its underlying investments. The discussions are private and a final agreement has not been reached, the sources told Bloomberg.

This is not a new arrangement between the two firms. Apollo first provided the NAV loan to Vision Fund 2 in 2021 and expanded it by $900 million last year to the current $5.4 billion level. According to the report, representatives for both Apollo and SoftBank declined to comment on the matter.

Context: Funding AI Ambitions

The potential loan increase comes as SoftBank accelerates its investments in the artificial intelligence sector. The company has a reported commitment of $64.6 billion to OpenAI and has been actively leveraging its assets to raise capital for its AI strategy.

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This includes a separate $10 billion loan SoftBank secured in August against its stake in the ChatGPT developer, a deal in which Apollo also participated as a lender. The additional liquidity from the Vision Fund 2 loan would further support SoftBank's substantial financing needs for its AI ventures.

Market Reaction and Fund Profile

SoftBank's aggressive financing strategy has drawn increased market scrutiny. The cost to insure the company's debt against default risk reportedly climbed to a three-year high this week, signaling investor concern about the risks associated with its large-scale AI bets.

SoftBank Vision Fund 2, one of the world's largest tech-focused investment vehicles, has made over 300 investments since its inception. SoftBank Group and its founder, Masayoshi Son, are the fund's largest investors.