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November 23, 2007 |
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SOJITZ CORP: S&P Affirms BB Long-term Corporate Credit Rating Standard & Poor's Ratings Services revised the outlook on its long-term corporate credit rating on Sojitz Corp. to positive from stable, reflecting an improved balance between the company's risk volume and its capital adequacy and profitability, as well as its enhanced financial profile. At the same time, Standard & Poor's affirmed its 'BB+' long-term corporate credit and 'BBB-' senior unsecured debt ratings on the company. "Sojitz has enhanced its capitalization in terms of both quality and quantity through the conversion of convertible bonds into common stock and preferred stock buybacks since May 2006, as well as the accumulation of earnings due to strong performance," said Standard & Poor's credit analyst Yuri Yoshida. "At the same time, progress in restructuring has helped the company reduce its risk assets, resulting in an improved balance between risk volume and its capital adequacy and profitability," she added. Although the general trader is beginning to take an aggressive stance toward new investments, which total JPY300 billion under its three-year management plan through March 2009, investment risk is likely to remain manageable given the company's capitalization and earnings. New investments under the plan totaled JPY140 billion at Sept. 30, 2007, and the company has managed concentration risk by keeping individual investments relatively small, at below JPY10 billion. In addition, the company revised its proprietary risk-return measurement, the Sojitz Corp. Value Added, to reflect risks relating to investments and loans. The measure is expected to strengthen and stabilize profitability. An upgrade would require Sojitz to further increase the sophistication of its risk management and enhance its business franchise. Introduced in 2004, the company's existing risk management system covers market, credit, and other general risks appropriately, but lags in business investment risk, which is of great importance to general trading firms. In addition, Sojitz's market position and revenue base are weaker than those of its peers. Standard & Poor's will focus its analysis on whether new investments by the company contribute to expanding its business franchise and improving returns on risk. |
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