S&P upgrades SoftBank's credit otlook to positive on Arm IPO

September 21, 2023 (MLN): S&P Global Ratings revised its credit outlook for Japanese technology investor SoftBank Group to positive from stable after the initial public offering (IPO) of British chip designer, Arm Holdings , its largest asset, last week, as Reuters reported.

S&P said the listing has led to a substantial improvement in the liquidity of SoftBank's investment portfolio and that this is likely to endure for the next year or so.

The agency affirmed its BB long-term issuer credit rating, saying it expected SoftBank's loan-to-value ratio to remain at its current level or worsen, and said it expected the group would continue to make growth investments "despite an uncertain external environment."

The credit rating agency had downgraded SoftBank from BB+ to BB - deeper into junk territory - in May, citing its exposure to unlisted companies, which made up around 62% of its portfolio at the time. With Arm's listing this has dropped to around 30%, S&P said.

Analysts have said that improving SoftBank's credit rating was likely a central motivation for listing Arm.

Group CEO Masayoshi Son is known to favor asset-backed loans to fund his investment activities, and SoftBank had previously taken out an $8.5 billion margin loan on around 75% of its stake in Arm, according to its F-1 filing last month.

The filing also said SoftBank expects to refinance this as a new loan facility, again backed by just over 75% of its Arm stake.

SoftBank shares failed to climb on the improved credit outlook, instead falling 2% in morning trade, their third day of declines. The stock has lost the gains made in the run-up to and immediately after Arm's IPO.

While Arm had a stellar first day of trade on September 15 with shares soaring 25%, it last traded just above its IPO price of $51.

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