S&P cuts Softbank’s outlook to negative
TOKYO: S&P Global Ratings cut the outlook for Softbank Group Corp. to negative, citing the broad market declines and the Japanese conglomerate’s plans to spend up to 500 billion yen ($4.8 billion) buying back shares.
The credit-rating agency said Softbank’s plans to spend so much on shares amid plummeting stock markets raises questions about its prioritisation of financial soundness. The agency did affirm the company’s longterm issuer BB+ rating. Softbank said it would buy back as much as 7% of its shares last week, taking a step advocated by activist investor Elliott Management Corp. to boost stockholder value. The Tokyo-based company made the announcement the same day as markets tumbled and its shares also declined.
“The company may struggle to maintain a level of financial soundness that is commensurate with the rating if stock prices remain volatile and result in a sharp drop in the value of its investment assets,” Hiroyuki Nishikawa and Makiko Yoshimura wrote in a research note.
S&P’S BB+ rating on Softbank put it at the highest non-investment grade, same as Moody’s Ba1. Japan Credit Rating Agency (JCR) ranks it at A-, or four levels above junk. Both Moody’s and JCR have a stable outlook on the company.
Softbank had 19.25 trillion yen of interest-bearing debt as of December 31, a 23% increase since the start of the fiscal year in April. Sprint Corp.’s imminent merger with T-mobile will lighten the load by about 4.9 trillion yen. The company had 3.8 trillion yen of cash and equivalents, while more than 2.6 trillion yen of bonds are coming due in the next three years.