Credit-rating firm S&P Global Ratings on Thursday questioned SoftBank Group Corp’s financial discipline as the tech conglomerate pursues a massive 2.5 trillion yen ($24 billion) share buyback program in volatile markets.
The buyback plan raises doubts about its intention to adhere to “financial soundness and creditworthiness”, S&P said, with SoftBank looking to raise up to $41 billion via asset sales.
CEO Masayoshi Son’s move to monetize key parts of his portfolio have already caused a public spat with Moody’s Investors Service after it slashed the group’s junk rating and questioned the viability of the plan.
Buybacks have helped SoftBank’s shares, which are used by Son as collateral for loans, climb 92% off lows struck in March despite SoftBank in May reporting a record annual loss as investments via its $100 billion Vision Fund flounder.
S&P revised its outlook for SoftBank to negative in March but stopped short of a downgrade of the current junk BB+ rating.
The group’s loan-to-value ratio, a key measure of indebtedness, has likely jumped to 30-35%, S&P said on Thursday, approaching the 40% level that would trigger a downgrade.
The impact of asset sales, which could improve the ratio by 5%, were not factored into that calculation.
SoftBank frequently emphasises its adherence to internal financial rules including retaining enough cash to cover bond redemptions for two years.
The group is raising 1.25 trillion yen from its stake in Alibaba Group Holding, which has an A+ rating from S&P, along with further funds from stakes in wireless carriers SoftBank Corp and T-Mobile US.
The value of the portfolio is in a few big assets and, while the credit impact of Vision Fund’s losses are limited, it underscores the “low quality of some assets” and “strong risk appetite”, S&P said.
At the end of April SoftBank had spent 250 billion yen on buybacks, which have been sought by activist investor Elliott Management.