S&P puts NTT companies on watch

S&P said it placed on CreditWatch with negative implications its long-term and senior debt ratings on Nippon Telegraph & Telephone Corp., its subsidiary NTT Docomo Inc., and financing subsidiary NTT Finance Corp.

The placements follow NTT’s announcement Tuesday. It plans to take full control of NTT Docomo through a tender.

“The implications are negative because NTT plans to finance the acquisition mostly with debt. The substantial damage this will do to its finances would far outweigh the benefits to its business, in our view,” S&P said in a press release.

The agency forecasts that if NTT follows its plan to finance the ¥4.3 trillion acquisition mostly with debt, the ratio in fiscal 2020 (ends March 31, 2021), the year the deal is made, would worsen to about 2.3x from about 1.3x in fiscal 2019.

That said, “Making NTT Docomo a wholly owned unit would benefit NTT’s performance and operations to some extent. This is because it would be able to swiftly push forward with initiatives to boost its competitiveness by reallocating group resources,” S&P noted.

If NTT follows through on its plan with mostly debt financing, S&P said it would be highly likely to downgrade the ratings by two notches.

© 2015 Prospect News.
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