EU and US could reach trade deal this weekend - Reuters
Investing.com -- S&P Global Ratings has downgraded Nippon Telegraph & Telephone Corp (TYO:9432). (NTT) and NTT Finance Corp. to ’A-’ from ’A’ following NTT’s acquisition of its listed subsidiary NTT Data Group through a tender offer.
The rating agency also lowered its short-term issuer credit ratings on both companies to ’A-2’ from ’A-1’ and removed them from CreditWatch with negative implications, where they had been placed on May 8, 2025. The outlook on the long-term ratings is now negative.
NTT announced Thursday that it had successfully concluded the tender offer for NTT Data Group. S&P based its downgrades on the view that damage to key financial metrics will significantly outweigh potential operational benefits, as the company will finance the offer using debt.
The rating agency estimates that NTT group’s debt-to-EBITDA ratio will deteriorate to the mid-3x range after the tender offer completion from 2.8x at the end of March 2025. This is despite NTT implementing measures to reduce its financial burden, including planned sales of a portion of NTT Data Group’s data center assets.
S&P also noted that NTT’s May 29, 2025 announcement to invest approximately ¥530 billion to acquire SBI Sumishin Net Bank Ltd. through its subsidiary NTT Docomo (OTC:DCMYY) Inc., along with a capital investment in SBI Holdings Inc., signals the group’s preference for growth investments over maintaining a sound financial position.
The negative outlook reflects S&P’s view that there is more than a one-in-three chance NTT will continue prioritizing growth investments and shareholder returns over financial soundness in the next one to two years, leading to further deterioration in its financial profile.
S&P may consider a downgrade if debt to EBITDA exceeds 3.5x for a sustained period, if competition intensifies leading to significant EBITDA margin declines, or if material regulatory changes damage NTT’s creditworthiness.
The outlook could return to stable if NTT’s consolidated earnings recover steadily and the group manages growth investments and shareholder returns appropriately, keeping consolidated debt to EBITDA below 3.5x on a sustained basis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.