S&P ends watch on Orix

S&P said it affirmed its A- long-term issuer credit and senior unsecured ratings on Orix Corp. and removed the ratings from CreditWatch. The outlook is negative.

“We placed the ratings on CreditWatch with negative implications on May 15, 2023, based on an increased likelihood of the Japan-based diversified finance company's risk-adjusted capital (RAC) ratio staying below 10% due to its plan to invest funds in Toshiba Corp.,” S&P said in a press release.

The resolution follows the successful bid of a consortium led by Japan Industrial Partners Inc. to buy out Toshiba, the agency said.

“We base the negative outlook on our view of the possibility that Orix's RAC ratio will remain below 10%. The company's RAC ratio was 9.8% as of March 31, 2023, below 10%, mainly due to the acquisition of major Japan-based manufacturer and distributor of health foods and cosmetics DHC Corp. in January 2023. In addition, we estimate Orix's investment in Toshiba will likely lower its RAC ratio 45 basis points (bps) compared with as of March 31, 2023. We also consider that sizable transactions, such as its acquisition of DHC and investment in Toshiba, will likely heighten concentration risk in its portfolio,” the agency said.

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