'Extremely regrettable': SoftBank hits back after S&P cuts credit rating further into junk

SoftBank offered a crisp rebuke connected Wednesday to S&P Global Ratings, aft the bureau downgraded the Japanese giant's recognition rating.

"Over the past year, our strict antiaircraft fiscal absorption has strengthened our fiscal presumption arsenic ne'er before," SoftBank said. "It is highly regrettable that our fiscal soundness was not decently assessed, and we volition proceed our dialog with S&P."

S&P Global Ratings connected Tuesday chopped SoftBank's standing to "BB" from "BB+" — wherever it deems a company's recognition standing arsenic "speculative grade" oregon "junk."

SoftBank shares closed down 2.3% successful Tokyo connected Wednesday.

SoftBank has turned itself into 1 of the world's biggest tech investors implicit the past fewer years, putting billions of dollars into immoderate of the biggest exertion firms, including Uber, via its 2 Vision Funds. SoftBank chiefly invests successful companies that are not publically listed.

Given the slump successful exertion shares amid globally rising involvement rates, the Vision Fund conception posted a grounds 4.3 trillion Japanese yen ($3.1 billion) loss for the fiscal twelvemonth ended Mar. 31, arsenic concern valuations plunged.

SoftBank has been cutting its involvement successful Chinese e-commerce Alibaba, which it has held for much than 2 decades and made the Japanese firm's laminitis Masayoshi Son his fortune. The purpose is to enactment up SoftBank's equilibrium sheet, arsenic the company's absorption has pledged to play "defense" and beryllium much prudent with its concern strategy.

S&P Global Ratings nevertheless argues that SoftBank's Vision Funds person a precocious vulnerability to unlisted institution shares, which are much volatile, arsenic a effect of selling Alibaba banal that are listed successful some the U.S. and Hong Kong.

"Ongoing income of shares successful China-based Alibaba Group Holding Ltd ... antecedently a large plus for the company, person eroded the proportionality of listed assets successful its portfolio," S&P said. "Furthermore, the exertion stocks successful which the institution has chiefly invested person been depressed for a prolonged period."

SoftBank argues that S&P is not taking into relationship its currency position, which roseate to 5.1 trillion yen successful the fiscal twelvemonth ended Mar. 31, versus 2.3 trillion successful the aforesaid play of 2022.

"It should beryllium noted that S&P's appraisal of the proportionality of listed assets excludes currency and deposits, etc. (JPY 5.1 trillion), which are the astir liquid assets," SoftBank said.

SoftBank successful 2016 acquired British spot decorator Arm — which past period confidentially filed for a listing successful the U.S. 

Going nationalist with Arm would beryllium a "positive factor" for SoftBank, S&P noted, but it hasn't included this improvement successful its appraisal due to the fact that the timing and valuation of the institution stay "uncertain."

SoftBank said it has "strongly urged S&P to see an upgrade erstwhile the projected archetypal nationalist offering of Arm is completed."

S&P besides noted that SoftBank is aiming for "disciplined fiscal absorption adjacent successful a hard operating environment," which continues to "underpin the company's creditworthiness."

Ultimately, the antagonistic factors outweighed the positives, the ratings bureau said.

"We truthful downgraded the company. The volatility of its concern portfolio and rising plus hazard thrust the negatives for the group. Meanwhile, fiscal absorption capability; a precocious level of cash; and holdings of shares successful Arm, which could beryllium listed, are positives."