SoftBank Group is contemplating legal action against Moody's Ratings after it issued a report on the tech-focused holding company.

The gripe is not so much about the Ba3 rating published in the report, especially since the credit-rating agency's outlook for SoftBank was upgraded from stable to positive. It is instead about the rating being unsolicited.

Bonds that are rated Ba3 by Moody’s are considered noninvestment grade, or speculative. In Wall Street jargon, they are known as junk bonds.

Credit rating agencies can be hired to conduct reviews. When they are, they are paid, have access to management and can request information and data.

The agencies can also issue ratings without the cooperation of companies. These unsolicited ratings have long been controversial. They are seen by some as a pressure tactic used to encourage companies to hire the agencies to conduct reviews.

“The continued publication of unsolicited ratings by Moody’s over the past four and a half years risks misleading investors in their decision-making processes,” SoftBank said in a statement issued Wednesday following the publication of the rating on the same day.

The company added that it is “exploring all available options, including the possibility of legal action and consultation with regulatory authority, to address this issue.”

In the report, “Moody’s Ratings revises SoftBank Group’s outlook to positive from stable, affirms Ba3 corporate family rating,” Moody’s credits the company with a number of improvements. It notes better fundamentals as a result of the listing of Arm Holdings, which took place in September 2023.

It estimates that SoftBank’s market value-based leverage is around 26% as of September 2024, compared with 41% a year earlier.

SoftBank has “good liquidity at the holding company level, which is able to cover scheduled debt maturities over the next two and a half years,” Moody’s notes in its report.

“The positive outlook also incorporates our expectation that the company will maintain good liquidity with its substantial cash balance.”

SoftBank is not happy at all. It said that it didn’t ask for Moody’s to conduct a review and hasn’t engaged the credit rating agency in years.

“Since withdrawing our request for ratings on March 25, 2020, we have neither provided any information to Moody’s regarding their ratings, nor received any requests for information or inquiries from them for over four and a half years,” the SoftBank statement said.

“Moody’s opinions are therefore based solely on their subjective assumptions and hypotheses, with no reasonable factual basis. Since March 2020, we have repeatedly requested that Moody’s remove the unsolicited ratings and change their publication method to avoid any misinterpretation by investors as granted credit ratings,” the SoftBank statement continued.

According to Moody’s, any bonds rated in the Ba category “are subject to substantial credit risk.”

S&P Global Ratings maintains a BB+ credit rating on SoftBank. This is also below investment grade.

The Japan Credit Rating Agency gives SoftBank an A rating, which means: “A high level of certainty to honor the financial obligations.”

SoftBank has long taken issue with the determinations of credit rating agencies. In early 2023, it slammed S&P for cutting the company’s rating from BB+ to BB. A year later, it was upgraded back to BB+.

Earlier this year, it issued a statement criticizing Moody’s for its unsolicited rating, much like the statement issued this week. In the earlier statement, it also indicated the possibility of legal remedies being sought.

“We have strongly protested this in the past and, once again, reiterate our request that Moody’s immediately cease the publication of unsolicited credit ratings,” SoftBank's statement on Wednesday said.

In the '90s, Moody’s was sued by Jefferson County, Colorado, after an unsolicited negative outlook was issued on county debt. Moody’s took the stance that it was publishing an opinion protected under the U.S. Constitution.

The lawsuit was ultimately dismissed.

A Moody’s disclaimer states its ratings are simply informed opinion and do not constitute financial advice.

SoftBank Group's credit is rated by S&P Global Ratings and the Japan Credit Rating Agency.

“There are no plans to seek ratings from other credit rating agencies," Hiroe Kotera, head of SoftBank’s media relations group, said via email in response to questions.