Moody's Upgrades SoftBank Group's Outlook To Stable, Citing Improved Leverage And Transparency Post-Arm IPO

Moody's revised SoftBank Group Corp's SFTBF SFTBY outlook to stable from negative and affirmed Ba3 Corporate Family rating.

The re-rating reflects the recovery in SBG's credit fundamentals driven by its lower leverage and greater transparency in its investment portfolio value following the IPO of Arm Holdings Plc ARM.

Also Read: ARM's Growth Trajectory: Analysts Bullish on Expansion in AI, Data Centers, Edge Computing And Rising Royalties

Moody's estimates that SBG's market value-based leverage (MVL) has improved modestly to 41% as of September 2023, down from a peak of almost 45% as of March 2022. SBG has substantially halted its new investments over the past 18 months. Meanwhile, SBG has reduced its net debt by reducing debt and increasing liquidity.

Moreover, the share of SBG's listed assets, primarily comprising Arm, SoftBank Corp (SBKK), and Alibaba Group Holding Limited BABA relative to its total portfolio value, has increased to over 60%, indicating improvement in the asset quality of its investment portfolio. Moody's estimates that the value of SBG's listed assets exceeded its total debt as of September 2023.

The company's rating is constrained by its low-interest coverage and reliance on dividends from SBKK.

In response, SoftBank Group said it has neither provided any information to Moody's regarding the rating nor has received any requests for information or inquiries from the company for more than three years since it withdrew the request for a rating on March 25, 2020.

Since March 2020, SoftBank Group has repeatedly requested Moody's to remove the unsolicited rating and change the publication method to avoid any misinterpretation by investors as a granted credit rating.

Price Action: ARM shares traded higher by 1.02% at $55.55 premarket on the last check Monday.

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