New York, March 16, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 9 March 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for this review was Investment Holding Companies and Conglomerates (Japanese) published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
For Investment Holding Companies we consider the following factors:
Investment Strategy: Investment strategy is considered because transparent and more conservative investment strategies can provide a longer-term view of an investment holding company's business profile, which is particularly relevant given the tendency for investment holding companies to acquire and divest assets. Greater visibility over the evolution of the company's investment portfolio is supported by clearly defined investment strategies in terms of the types of assets the company seeks to invest in, the intended tenure of its investments and the targeted composition of its investment portfolio. We assess the investment holding company's investment policies and guidelines, as well as management track record. The existence of publicly communicated goals and a commitment to adhere to these is also helpful in our assessment, particularly when a proven track record is present.
Asset Quality: The asset quality of the investment portfolio represents one of the drivers of the company's credit risk. Our assessment considers investment concentration, geographic and business diversity, and portfolio transparency. The transparency and consistency of management in communicating information is a key element of our analysis. Listed investments in markets where regulatory disclosure requirements are strong can help to provide more reliable information.
Financial Policy: Management and board tolerance for financial risk is considered as it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. This is important given an investment holding company's exposure to equity risks, which can result in greater volatility in leverage metrics relative to other corporates. The acquisition and divestiture activities of investment holding companies also make it more challenging to estimate future leverage. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations also include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability for the company to achieve its targets.
Estimated Market Value-Based Leverage (MVL): The majority of an investment holding company's assets are typically equity participations in subsidiaries and associates. In the event that the holding company decides to lever its equity returns by funding part of the investments through the issuance of debt, the credit risk of this debt is significantly impacted by asset values available to cover potential fixed debt charges. The MVL is measured as Net Debt/Estimated Market Value of Portfolio Assets.
Debt Coverage and Liquidity: Operational cash flows that can regularly cover interest expenses reflect positively on the investment holding company's financial flexibility and long-term viability. Investment holding companies that do not have a sufficiently mature portfolio paying an adequate level of dividends to cover their interest and debt payments are more reliant upon cash and credit facilities, which we believe should be reserved for a market downturn. The timing of debt repayments can play a particularly significant role in the credit profile of an investment holding company as the concentration of maturities can present liquidity challenges and heighten refinancing risk. Debt Coverage and Liquidity is measured by ratios such as Funds from Operations plus Interest/ Interest Expense and Liquidity/Debt maturities.
Other Considerations: Other considerations may include, but are not limited to, corporate governance, financial controls, liquidity management, group complexity, degree of influence over dividends of investees, event risk as well as parental and institutional support.
For conglomerates we incorporate a balanced view of the credit risk in each business segment, with further consideration of the potential overall risk reduction due to industry and country diversification of assets and cashflows, portfolio stability, together with the ownership structure and the relationship between subsidiaries and the broader group.
Credit Risk of Each Business Segment: We assess the individual business and credit risk profile of each major industry segment of a conglomerate by applying the scorecard from the respective industry sector methodology. In most cases, it is most meaningful to do this only for the two or three largest industry segments. Where necessary, this approach includes an allocation of the conglomerate's Holdco debt to its subsidiary businesses in order to estimate individual ratios which allow for a weighted average calculation for the total group. The weighting is usually centered around cash flow metrics (such as each major segment's contribution to EBITDA) since this can represent an approximation for the debt capacity of the various subsidiaries.
Risk Reduction from Industry/Country Diversification: Business diversification within a conglomerate can bring potential benefits for creditors. At the same time, diversification exists only to the extent that correlation is low across the various businesses. We therefore take a very pragmatic and cautious approach to diversification.
Portfolio Stability: The stability of a conglomerate's portfolio during a certain time period is assessed by analyzing the stability of investments in assets and their asset mix (e.g. by sector, country, or revenue vs. cash flow focus), the number of acquisitions, spin-offs, and "greenfield" developments. Strong discipline with clear guidance on a balanced investment strategy and limited event risk is considered as a positive step for the overall credit risk of the conglomerate
Ownership Structure: The type of ownership might be a potential source of benefit for the credit assessment of the conglomerate. For example, a conglomerate with stable ownership (possibly majority remaining with a family) and a clear succession plan is assessed positively. Conversely, unclear ownership influences or weak governance structures may impair the overall rating outcome, and is assessed negatively.
Relationship Between Subsidiaries and the Broader Group: There might be circumstances under which the parent holding provides specific financial support to a business which is part of the overall conglomerate. This may be accomplished, for example, through intercompany loans, equity top-ups, asset transfers, granting of financial guarantees or debt forgiveness. The overall strength of support depends on the type of measure and our assessment of the willingness and ability of the parent to grant this support.
SoftBank Group's ratings are unsolicited. For additional information, please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
As of the date of this report SoftBank Group has declined to participate in the Credit Rating process, and has not provided Moody's with access to its books, records and other internal documents. For more information about Non-Participating Rated Entities, see Moody's Policy for Designating Non-Participating Rated Entities.
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on www.moodys.com, for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
List of Issuers/Rated Entities
SoftBank Group Corp.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
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