How Apollo’s SoftBank ties unlocked an unprecedented OpenAI bet

If there’s one relationship that illustrates how private credit is enabling some of the most consequential AI investments, it’s Apollo Global Management’s with SoftBank Group.

Since 2021, Apollo has provided and arranged more than $15 billion of debt for SoftBank across multiple deals, people familiar with the matter said, helping to fuel Maysayoshi Son’s nearly $65 billion bet on OpenAI. From lending tied to the ChatGPT maker’s value to a loan backed by a flagship fund, SoftBank has become one of Apollo’s largest corporate borrowers.

But Apollo is also beginning to contend with the limits of its SoftBank lending as it takes a more defensive approach to AI investing. How far Apollo can go in bankrolling one of OpenAI’s biggest investors is a crucial test for whether private credit will be able to profitably fill gaps in AI financing beyond the reach of traditional lenders.

A portion of Apollo’s SoftBank lending has been made through its insurer Athene, which held at least $4.8 billion of SoftBank-related debt at the end of September. While the amount represents only about 1% of Athene’s gross invested assets, it is one of the company’s largest individual exposures and brings Athene toward the edge of its concentration limit for a single borrower.

Meanwhile, SoftBank has been hit hard by a broader reckoning for the AI trade. On Tuesday, the company reported a $7 billion loss after several of its tech investments lost value. SoftBank’s shares have plunged more than 50% since June, while its credit risks have risen. OpenAI also scaled back its ambitions in a recent fundraising round.

Some Apollo executives privately acknowledge that the recent selloff in AI stocks and bonds has given the asset manager pause. It’s unlikely that Apollo will pledge more OpenAI-related capital for SoftBank until there’s more clarity in the market, they said, though there might be room to increase an existing $9.2 billion net-value-asset loan slightly.

“Apollo is a clear example of how private credit is bridging the capital gap for the AI buildout,” said Anna Wu, an investment strategist and founder of Floodlines Research. “But risk is starting to surface at the edges.”

This account of how Apollo became a major SoftBank financier draws on interviews with people with knowledge of how the partnership developed. They asked not to be named discussing private information. Representatives for Apollo and SoftBank declined to comment.

Record deal

Apollo had spent years trying to crack SoftBank, pitching financing ideas that could go where the banks couldn’t. Rajeev Misra, then one of the most powerful — and polarizing — figures in Masayoshi Son’s inner circle, gave the firm its opening in 2021.

Back then, SoftBank already had major lenders like Goldman Sachs Group and JPMorgan Chase at the ready. But assembling a large bank syndicate takes time, and SoftBank needed the cash quickly. Misra asked if Apollo could arrange a complex $4.5 billion loan in just 45 days.

Apollo dealmakers worked long hours and dealt with punishing time differences to assemble the record-breaking NAV loan by the deadline. The deal was novel and involved borrowing against the paper value of more than 150 companies in SoftBank’s Vision Fund 2.

Importantly, Apollo found a way to make the deal profitable by mirroring how banks handle big borrowings. On top of its 1% commission for arranging the loan, Apollo typically earns fees from distributing portions of debt to other investors. In this case, some of the NAV loan was sold to Pacific Investment Management.

Representatives for Pimco and JPMorgan did not respond to requests for comment. Goldman Sachs declined to comment.

The complex structure of the loan also allowed Apollo to negotiate a higher coupon. The debt, due in 2029, pays a floating interest rate of 7.3%, filings earlier this year showed. That compares with the roughly 4% cost of SoftBank’s existing debt stack.

Misra, a former Deutsche Bank AG trader, played a crucial role in selling the complicated Apollo deal inside SoftBank. He’d previously cultivated a relationship with Apollo’s head honchos, including Chief Executive Officer Marc Rowan, and vouched for the asset manager when SoftBank Chief Financial Officer Yoshimitsu Goto expressed doubts.

A representative for Misra, who left SoftBank in 2024, declined to comment.

Rising risks

Over the last 15 months, Apollo increased the size of the NAV loan twice to $9.2 billion. In August, it stepped in as the only nonbank lender when SoftBank struggled to secure a separate $10 billion loan.

At the same time, Apollo has broadened its lending across the AI ecosystem. It has in recent months participated in large-scale financings for Broadcom, Anthropic and SpaceX.

Even as it takes big risks, Apollo has made sure protections are built in. The $10 billion loan to SoftBank that it participated in is guaranteed by the company and has clauses that guard against a steep drop in OpenAI’s value, including early repayment.

The NAV loan to Vision Fund 2, however, is running up against the limits of its own success.

Apollo has been able to increase the loan because of OpenAI’s extraordinary growth — the latest funding round puts the startup’s value at $1.25 trillion. But OpenAI’s ascent has also transformed Vision Fund 2 from a diverse collection of investments into one dominated by a single holding, with the AI company making up about three-quarters of the fund’s fair value.

Apollo designed the NAV loan so that OpenAI can’t account for more than a fifth of its collateral, theoretically insulating the debt against a blow-up. Nevertheless, its loan-to-value ratio has increased since it was first extended, even as the metric remains below 20%.

Whether or not Apollo slows further lending to SoftBank, the asset manager has already reaped longer-term benefits. Apollo used its experience from 2021 to pitch NAV loans to other fund managers. Last year alone, Apollo signed almost $20 billion worth of NAV loans for Athene that went to private equity firms including Vista Equity and Warburg Pincus.

The deals are typically structured so they can be funded with insurance capital, allowing junk-rated borrowers like SoftBank to access bigger pools of capital reserved for investment-grade debt.

The scale of funding needed for AI — over $5 trillion by 2030, JPMorgan estimates — will mean more “customized financing” like SoftBank’s NAV loan, according to Benjamin Forestier, an affiliate professor at École Polytechnique. But that also raises risks if “technology valuations suddenly deteriorate,” he said.

“The real question is not whether we can find enough capital to build all these data centers,” Forestier said. “It is whether they will generate sufficient cash flows to justify the capital invested.”