TOKYO: Japan’s SoftBank Group Corp saw its credit outlook downgrade from “stable” to “negative” on Tuesday by ratings agency Moody’s Investors Service, which cited a drop in the value of its portfolio and estimated that the effect of technology investor leverage had increased.
SoftBank announced a record loss in its Vision Fund unit this month as technology valuations tumbled, with founder and chief executive Masayoshi Son promising to curb investment activity and preserve cash.
In an effort to raise funds, SoftBank hopes to list chip designer Arm after a deal to sell the company to Nvidia fell apart after hitting regulatory hurdles.
Moody’s said the collapse of the deal “shows the challenges of quickly realizing the full value of these stakes” and added that SoftBank’s attempt to list Arm “faces execution risk in timing and evaluation”.
SoftBank asked Moody’s to withdraw its ratings in 2020. The conglomerate said the latest assessment “is based on their subjective assumptions and assumptions without any reasonable basis of support.”
The company highlighted its financial leeway, saying its loan-to-value ratio was 20.4% at the end of March, an improvement from three months earlier.
Moody’s said that, unlike SoftBank, it includes an $8 billion loan secured by Arm’s stake in its measure of the group’s leverage.
“It’s unclear whether (SoftBank) will sustainably reduce leverage,” Moody’s said.