SoftBank provided a pointy rebuke on Wednesday to S&P Global Ratings, after the company downgraded the Japanese large’s credit rating.

“Over the previous 12 months, our strict defensive monetary administration has strengthened our monetary place as by no means earlier than,” SoftBank mentioned. “It is extraordinarily regrettable that our monetary soundness was not correctly assessed, and we’ll proceed our dialogue with S&P.”

S&P Global Ratings on Tuesday reduce SoftBank’s rating to “BB” from “BB+” — the place it deems an organization’s credit rating as “speculative grade” or “junk.”

SoftBank shares closed down 2.3% in Tokyo on Wednesday.

SoftBank has turned itself into one of many world’s largest tech traders over the previous few years, placing billions of {dollars} into a number of the largest expertise companies, together with Uber, through its two Vision Funds. SoftBank primarily invests in firms that aren’t publicly listed.

Given the droop in expertise shares amid globally rising rates of interest, the Vision Fund section posted a record 4.3 trillion Japanese yen ($3.1 billion) loss for the fiscal 12 months ended Mar. 31, as enterprise valuations plunged.

SoftBank has been chopping its stake in Chinese e-commerce Alibaba, which it has held for greater than twenty years and made the Japanese agency’s founder Masayoshi Son his fortune. The intention is to shore up SoftBank’s steadiness sheet, as the corporate’s administration has pledged to play “protection” and be extra prudent with its investment strategy.

S&P Global Ratings nonetheless argues that SoftBank’s Vision Funds have a excessive publicity to unlisted firm shares, that are extra unstable, on account of promoting Alibaba inventory which can be listed in each the U.S. and Hong Kong.

“Ongoing gross sales of shares in China-based Alibaba Group Holding Ltd … beforehand a serious asset for the corporate, have eroded the proportion of listed belongings in its portfolio,” S&P mentioned. “Furthermore, the expertise shares by which the corporate has primarily invested have been depressed for a protracted interval.”

SoftBank argues that S&P isn’t taking into account its money place, which rose to five.1 trillion yen within the fiscal 12 months ended Mar. 31, versus 2.3 trillion in the identical interval of 2022.

“It needs to be famous that S&P’s evaluation of the proportion of listed belongings excludes money and deposits, and so forth. (JPY 5.1 trillion), that are essentially the most liquid belongings,” SoftBank mentioned.

SoftBank in 2016 acquired British chip designer Arm — which final month confidentially filed for a listing in the U.S. 

Going public with Arm could be a “optimistic issue” for SoftBank, S&P famous, however it hasn’t included this improvement in its evaluation as a result of the timing and valuation of the corporate stay “unsure.”

SoftBank mentioned it has “strongly urged S&P to think about an improve as soon as the proposed preliminary public providing of Arm is accomplished.”

S&P additionally famous that SoftBank is aiming for “disciplined monetary administration even in a tough working surroundings,” which continues to “underpin the corporate’s creditworthiness.”

Ultimately, the adverse components outweighed the positives, the rankings company mentioned.

“We due to this fact downgraded the corporate. The volatility of its funding portfolio and rising asset threat drive the negatives for the group. Meanwhile, monetary administration functionality; a excessive degree of money; and holdings of shares in Arm, which might be listed, are positives.”