SoftBank’s finance chief slams S&P Global for not upgrading group’s credit rating

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SoftBank’s finance chief has accused S&P Global of “not trusting the management” and criticised the rating agency for failing to upgrade its credit rating after the blockbuster listing of UK chip designer Arm.

In an interview on Thursday, Yoshimitsu Goto said he was “deeply disappointed” with S&P’s decision on the same day to stop short of an upgrade, despite raising its credit outlook from stable to positive.

The rating agency in May cut SoftBank’s long-term credit rating from double B plus, its highest non-investment grade, to double B following record investment losses. But analysts had expected an upgrade after SoftBank raised $5bn in the Arm listing, strengthening the group’s balance sheet and financing capability.

“It’s completely mind-boggling why there is no upgrade despite the fact that we clearly met the conditions that S&P laid out for an upgrade,” Goto said. He questioned why SoftBank’s strong cash position would be considered a credit negative by S&P.

“They don’t trust our management in terms of financial discipline or investment policy,” he said about S&P. “If they can’t believe in our finance policy, there is no point for the company and the rating agency to continue communicating. Their stance is hugely problematic.”

In raising the outlook, the rating agency said the proportion of listed shares had increased to 70 per cent, as the Arm listing “greatly increased” the group’s liquidity. The ratio had been about 38 per cent in May, when it had cut SoftBank’s long-term credit rating deeper into junk territory.

However, S&P warned that SoftBank’s “loan-to-value (LTV) ratio will likely remain at the current level or slightly worsen”, arguing that its “investment gains and losses will likely remain potentially volatile”.

S&P added that SoftBank was likely to “continue making growth investments, despite an uncertain external environment” and “is highly likely to continue to raise funds by using Arm’s shares, in addition to issuing corporate bonds and borrowing from banks”.

SoftBank is expected to go on a dealmaking spree with a focus on artificial intelligence investments using the extra cash generated by the Arm IPO, the highest flotation on Wall Street in five years.

People familiar with SoftBank founder Masayoshi Son’s thinking have said he was considering an investment in OpenAI, the Microsoft-backed company behind ChatGPT.

“We will actively invest but our premise is to maintain our financial discipline,” Goto said.

Shares in SoftBank closed 3.1 per cent lower on Thursday. S&P could not immediately be reached for comment.