Founded by Masayoshi Son, SoftBank is well known for its large scale investments in tech companies particularly through its involvement in the Saudi Arabian funding vehicle Vision Fund. However, one of the company's key rating metrics, loan-to-value, has been a negative for credit rating analysts at Moody's and S&P, as reported by Bloomberg.
The company's loan-to-value metric (the amount of exposure to a borrower a company has through its funding) is seen to be between 25 and 35 according to Moody's and S&P, far higher than SoftBank's own figure of 14.
The metric has taken on greater meaning since the company floated its telecoms business in a $23.5 billion IPO last year.
The major difference between the calculations comes down to the higher estimation of SoftBank's net debt with ratings agencies including the company's commitments as part of the $100 billion Vision Fund. High leverage has been a major factor in company's thinking of late with warnings about the high debt levels of companies such as GE and AT&T.
SoftBank is currently rated one notch below investment grade and its debt heavy strategy could be seen as a concern for analysts and potentially investors. Last month the company significantly scaled back planned investment into WeWork amid questions about the viability of the loss-making office space company.
"Mr. Son says he intends to monetize the portfolio more actively, but the company has yet to establish a track record of that," said Motoki Yanase, Tokyo-based vice president and senior credit officer at Moodys, said in a phone interview Wednesday with Bloomberg. It would be a very challenging step to upgrade this company to investment grade.
Research firm CreditSights also recently suggested cutting back on exposure to the company's bonds as a result.
SEE ALSO: Here's how the risky behavior of debt-heavy corporate giants like GE and AT&T could spark the next financial crisis
