Softbank has demanded that Moody’s remove all of its bond ratings after the ratings agency downgraded the conglomerate’s debt by two notches and said it was reviewing the tech investment giant for a further downgrade.
Softbank immediately hit back, accusing Moody’s of having based its decision on “its biased and mistaken views” and “excessively pessimistic assumptions”, and took the unusual step of asking Moody’s to withdraw its ratings.
The corporation said the rating “will cause substantial misunderstanding among investors… and result in significant confusion for issuers”.
The downgrade may increase borrowing costs for Softbank, which has a total of $55bn net debt (£46bn).
It comes two days after Softbank said it would raise as much as $41bn through asset sales to fund its biggest ever buyback, after investors sold shares due to concern over high leverage and souring bets on unproven startups via its $100bn Vision Fund.
“Softbank believes that Moody’s ratings action is based on excessively pessimistic assumptions regarding the market environment and misunderstanding and speculation that Softbank will quickly liquidate assets without any thorough consideration and without making improvements to its financial condition,” the group said.
Softbank’s shares have rallied 55 per cent since it announced the buyback, which will see the group retire almost half its shares.
However the conglomgerate’s ability to engineer the sale of part of a portfolio that includes a substantial stake in Chinese ecommerce giant Alibaba is under scrutiny as the coronavirus outbreak rattles markets.
Moody’s cited Softbank’s “aggressive financial policy” as contributing to its decision to downgrade the group, founded and run by Masayoshi Son, from a Ba1 to a Ba3 rating.
The agency said the value of Softbank’s sprawling portfolio would be hit if it sold off lucrative holdings in Alibaba and telecoms firm Sprint in the current market environment.
“Asset sales will be challenging in the current financial market downturn, with valuations falling and a flight to quality,” said Moody’s analyst Motoki Yanase.
Softbank has declined to identify the assets that will be sold or monetised, and said it plans to make the transactions over the next four quarters.
The spat with Moody’s comes after it emerged that Softbank explored an attempt to take itself private over the weekend, as Son rushed to revive the group’s shares after they were hit by last week’s stock market rout.
Son held talks with investors including Elliott Management, the activist investor that holds a $2.5bn stake in the group, and Abu Dhabi sovereign investment vehicle Mubadala, according to the Financial Times.
Softbank eventually decided to move ahead with the asset sale to pay down more of its debt and fund the increased share buyback, the paper reported.