SoftBank was downgraded to BB from BB+ by S&P and its subordinated notes to B from BB-. The rating agency said that SoftBank has “become more susceptible to the external environment” than previously expected. Its investments in global tech companies are “highly volatile” with cumulative losses in its SoftBank Vision Funds (SVFs) 1 and 2 at $8.5bn at end-March 2023. S&P also added that SoftBank’s investment portfolio’s asset liquidity is likely to remain much lower than its tolerance range for a BB+ rating. Also the fraction of listed shares in SVF1 and SVF2 has been falling sharply and is expected to remain low. On the positive side, S&P notes SoftBank’s holding of Arm shares as the largest portfolio asset is a plus, with a likely sharp improvement in asset liquidity if Arm is listed.
In response to the downgrade, SoftBank has come down hard on S&P saying that its “financial soundness was not properly assessed”. For example, it said that the selling off assets including its stake in Alibaba was for balance sheet stability.
SoftBank’s 6.875% Perp was trading lower by 0.5 points at 89.34, yielding 10.1% to its next call date in July 2027.