Billionaire Masayoshi Son's plan to list his cash-cow telecom business is raising concern among observers that the company might stop guaranteeing the debt of its parent, SoftBank Group Corp., worsening the quality of its credit.
The mobile division SoftBank Corp. assures payments to investors on $33.4 billion in bonds of its parent, which is rated junk by Moody's Investors Service and S&P Global Ratings, according to Bloomberg-compiled data. The unit needs to prove its independence to get listed on the Tokyo Stock Exchange, meaning that it would probably have to cancel the guarantees to pass the test, according to Japan Credit Rating Agency and Asahi Life Asset Management.
"It's the mobile company that's generating cash flows, so its guarantees have been a source of a very strong sense of assurance" for bond investors, said Yoshihiro Nakatani, senior fund manager at Asahi Life Asset. "It would be a problem morally" if it canceled them without negotiating with investors, he said.