(The following statement was released by the rating agency)
Oct 12 - Overview
-- Softbank has announced it is in discussions with Sprint Nextel toinvest in the U.S.-based wireless company.
-- The transaction, if it proceeds, may undermine Softbank's financialprofile, partly because of the weaker financial standing of Sprint Nextel.
-- We placed our corporate credit and issue ratings on Softbank onCreditWatch with negative implications.
-- We will resolve the CreditWatch status depending on the progress ofthe negotiations. Key factors for Softbank's credit quality include the amountof the investment, the financial scheme of the transaction, Sprint Nextel'sposition in Softbank's global strategy, and Softbank's financial policy andwillingness to support Sprint Nextel.
Rating Action
On Oct. 12, 2012, Standard & Poor's Ratings Services placed its 'BBB'long-term corporate credit and senior unsecured debt ratings on Softbank Corp.on CreditWatch with negative implications, based on the company's announcementthat it is in discussions to invest in U.S.-based wireless service providerSprint Nextel Corp. (B+/Watch Pos/--). The transaction, if it proceeds, mayundermine Softbank's financial risk profile, in our view. We will resolve theCreditWatch status depending on the progress of the negotiations.
Rationale
In our view, plans by Softbank to invest substantially to expand and upgradeits mobile network in Japan will pressure its free operating cash flow for atleast the next few years. Accordingly, regardless of how the company financesthe potential investment, Sprint Nextel's significantly weaker financial riskprofile may materially undermine Softbank's "intermediate" financial riskprofile, under our criteria. Sprint Nextel's financial risk profile is "highlyleveraged" and its liquidity is "less than adequate." We also expect materialdeficits in Sprint Nextel's free operating cash flow over the next few years.Preliminarily, we do not believe a potential investment would createmeaningful synergies as the two companies operate in different geographicmarkets. Nor do we expect any immediate benefits to Softbank's currentbusiness risk profile, which we currently view as "satisfactory."
CreditWatch
We will resolve the CreditWatch status depending on the progress of thenegotiations. Key factors for Softbank's credit quality include the amount ofthe possible investment; the financial scheme of the transaction; SprintNextel's position in Softbank's global strategy; and Softbank's financialpolicy and its willingness to provide financial support to Sprint Nextel,including its outstanding debt with a change of control clause.
Related Criteria And Research 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Key Credit Factors: Business And Financial Risks In The Global Telecommunication, Cable, And Satellite Broadcast Industry, Jan. 27, 2009 Ratings List CreditWatch Action To From Softbank Corp. Corporate Credit Rating BBB/Watch Neg/-- BBB/Stable/-- Senior Unsecured BBB/Watch Neg BBB
((Bangalore Ratings Team, Hotline: +91 80 4135 5898satish.kb@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com,Reuters Messaging: satish.kb.thomsonreuters.com@reuters.net))