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Business News/ Companies / News/  'Too bad they came to such unreasonable conclusion' SoftBank fires back after S&P rate cut
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'Too bad they came to such unreasonable conclusion' SoftBank fires back after S&P rate cut

SoftBank Group Corp. issued a sharp rebuke after S&P Global Ratings cut its long-term credit rating a notch further into junk territory, citing the Japanese tech conglomerate’s exposure to private market valuations and other external risk factors.

SoftBank has issued a sharp rebuke after S&P Global Ratings cut its long-term credit rating a notch further into junk territory, (Photo: AP)Premium
SoftBank has issued a sharp rebuke after S&P Global Ratings cut its long-term credit rating a notch further into junk territory, (Photo: AP)

In a sharp rebuke to S&P Global Ratings rate cut SoftBank Group Corporation has said that its financial soundness was not properly assessed by the S&P firm and the company will continue its dialogue with S&P.

The sharp comments by the global tech firm have come after the S&P Global Ratings, cut its long-term credit rating a notch further into junk territory, citing the Japanese tech conglomerate’s exposure to private market valuations and other external risk factors.

Evaluating the data of SoftBank firm, S&P Global had said that the credit risks of the Japanese firm are rising because it is selling off public assets such as Alibaba Group Holdings Ltd, etc. Another reason for rising credit risk is its high exposure to private startups with more volatile valuations.

In its rebuttal, the Tokyo-based bank criticised the S&P Global for its rate cut and expressed its confidence that selling off assets like Alibaba in exchange for cash is better for its balance sheet stability.

“Over the past year, our strict defensive financial management has strengthened our financial position as never before," the company said in its statement. “It is extremely regrettable that our financial soundness was not properly assessed, and we will continue our dialogue with S&P," added the statement.

“We’ve had respect for the S&P," said Goto. “It’s too bad they came to such an unreasonable conclusion."

The Chief Financial Officer of SoftBank, Yoshimitsu Goto told Bloomberg that the rating cut will neither hinder SoftBank's borrowing costs nor its balance sheet management method. The CFO also added that the company is in no need to issue new bonds provided its ample cash reserve of over ¥5 trillion.

SoftBank will still need to refinance bonds that were sold to retail investors — some ¥350 billion worth — which is coming due during the March quarter of next year, according to Goto. Only time will tell where yields trade around that time, but SoftBank’s coupon rate for bonds sold to individuals is linked to Japan Credit Rating Agency Ltd.’s ratings and not those of the S&P, he said.

If SoftBank sees weaker demand for its bonds, “we can always adjust the timing of any fresh issuance," Goto told Bloomberg News in a video call.

In its report, S&P highlighted the rising credit risk of the Japanese tech bank because of its selling off public assets such as Alibaba Group Holding Ltd. and increasing its exposure to private startups with more volatile valuations as a result. Citing these reasons, S&P downgraded SoftBank's ratings to BB from BB, reported Bloomberg. After the rate cut, SoftBank shares dropped by as much as 2.3% in Tokyo. Its credit default swaps — the cost to insure SoftBank’s debt — rose by the most in about a month.

“Asset risk in SoftBank Group Corp.’s investment portfolio is rising more than we had assumed; its liquidity and creditworthiness are likely to remain materially weakened for the next year or so," the agency wrote in its report.

Notably, SoftBank is now fighting back against credit-rating firms for the first time. The company had a long tussle with Moody's Investors Service to which it has not provided information since March 2020.

(With inputs from Bloomberg)

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Published: 24 May 2023, 11:24 AM IST
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