Please ensure Javascript is enabled for purposes of website accessibility

Softbank Lashes Out at Moody's After Debt Downgrade

By Will Healy - Mar 25, 2020 at 10:54AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Moody's downgraded Softbank's debt by two notches.

Softbank (SFTBF 0.12%) reacted swiftly to its debt downgrade from Moody's. The Japanese conglomerate demanded that the ratings company remove all debt ratings on the company after Moody's downgraded Softbank's debt by two notches, sinking it deeper into junk territory.

Softbank has come under fire recently over its debt load, which has risen to more than 12.2 trillion yen ($109.5 billion). This worry sent Softbank stock plunging, until a recently announced plan to sell $41 billion in assets to pay down the debt sparked off a rally.

Nonetheless, what seemed to placate stock investors did not sway Moody's. Now, Softbank's debt rating stands at Ba3, down from Ba1. This followed a similar move by S&P Global earlier this month. S&P cut its outlook to negative on Softbank over plans for a stock buyback. Also, in December, Softbank reported its largest quarterly loss in 14 years.

Communication tower on top of a cloud-covered mountain top.

Image Source: Getty Images

Moody's seemed to react negatively to Softbank's asset sale strategy. In the downgrade, they cited an "aggressive financial policy" as the reason for the rate cut. They also questioned the rationale for an asset sale in the current market. Due to the fears surrounding COVID-19, the S&P 500 has fallen by more than 26% in the last five weeks.

Softbank shot back, saying Moody's based their decision on "excessively pessimistic assumptions regarding the market environment and misunderstanding that SBG will quickly liquidate assets without any thorough consideration."

The company had also explored options to go private with Elliott Management and Mubadala, an Abu Dhabi-based sovereign investment vehicle, according to a report from The Financial Times. After these discussions, which included Softbank founder and CEO Masayoshi Son, they decided on the plan to sell assets and to increase share buybacks to 2.5 trillion yen ($22.43 billion).

Softbank has not identified which assets it will sell. However, analysts speculate that they will sell shares in Sprint, Alibaba, and a mobile unit that trades on the Tokyo exchange.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
$40.29 (0.12%) $0.05
Sprint Corporation Stock Quote
Sprint Corporation
Moody's Corporation Stock Quote
Moody's Corporation
$291.99 (-0.30%) $0.89
S&P Global Inc. Stock Quote
S&P Global Inc.
$347.66 (-0.92%) $-3.21
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
$82.31 (-0.19%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.