more than $55 billion in net debt. S&P lowered Softbank's credit rating outlook to negative, worried how a deal to take a controlling stake in a financially weak Sprint could negatively affect Softbank's financial position.
Sprint shareholders might not make out as well as they thought they might. Softbank plans on buying new treasury shares directly from Sprint and then making a tender offer for the balance of the stock. Softbank expects to pay no more than $6.50 for its shares. Sprint closed Friday at $5.73 a share, down 3 cents, after rising 14% on Thursday on news of the deal. One analyst, J.P. Morgan's Philip Cusick, said that although his firm expects Sprint to be trading between $6 and $7 in a year, he hears that some big holders of the stock expect it to trade at $10 or higher.
In 2008, Softbank had a major problem when money it set aside for a debt redemption was lost when it was invested in a credit default swap. The company came back riding the tails of Apple as it was the exclusive carrier of the Apple iPhone in Japan for some time. Softbank's founder and CEO, Masayoshi Son, had promised not to make any acquisitions until the company paid off its debt which he promised to do by March 2014. He has obviously decided that buying a huge stake in Sprint is worth breaking his word for, striking while the iron is hot.