Astronomical Debt
Son is set to play a major role in Alibaba after its IPO, with SoftBank guaranteed a board seat, backing the e-commerce company’s partnership and pledging to keep its stake above 30 percent.
While Son has financed his empire with borrowed money -- including his $22 billion bid for Sprint and $15 billion deal for Vodafone Group Plc’s Japanese unit in 2006 -- the flip-side is a battered credit rating. Moody’s Investors Service and Standard & Poor’s last July cut SoftBank’s rating to junk.
“SoftBank is one of the most leveraged companies in the world.” said Amir Anvarzadeh, manager of Japanese equity sales in Singapore at BGC Partners Inc. “The level of debt is astronomical.”
SoftBank had interest bearing debt of about $90 billion as of March 31, the company said yesterday. Its debt-to-equity ratio is 320 percent, the second-highest among the world’s top 40 telecommunications companies, according to data compiled by Bloomberg.
Eclectic Mix
Peggy Furusaka, a Tokyo-based credit analyst who covers SoftBank for Moody’s, said listing Alibaba would be “credit positive” for the phone company to the extent that it makes it the shares easier to sell.
“If they sell shares and say they’ll use the cash to pay down debt or repay bonds, then -- and really only then -- will it impact financial ratios,” she said. “It only has significance if the shares are monetized and used to repay debt.”
Should Son fail to overcome regulatory opposition to a T- Mobile deal, there are other options. He could look to buy the second- or third-tier operators in Europe, according to Hideki Yasuda at Tokyo-based Ace Research Institute.
He could also boost his investments in content for mobile devices such as games or music, areas where he’s already shown interest. SoftBank made an $8.5 billion bid for Vivendi SA’s Universal Music Group that was rejected by the French media company, people with knowledge of the proposal said in July.