(Bloomberg) -- SoftBank Group Corp. was able to reduce underwriting fees for yen retail bonds for the first time in a decade, underscoring the market’s perspective that its credit quality is improving.

Billionaire Masayoshi Son’s firm paid brokerages ¥1.10 per ¥100 to underwrite ¥550 billion ($3.5 billion) of seven-year notes for individual investors, according to a company filing. That was a decrease from the ¥1.25 rate that it paid on its retail bond sales since 2014, including its most recent deal in March, data compiled by Bloomberg show. 

Debt rating firms have raised SoftBank Group’s grade as the Tokyo-based company’s earnings from investment begin to stabilize. Japan Credit Rating Agency Ltd. in April lifted the firm’s debt score to A from A-, its first upgrade in more than a decade, while S&P Global Ratings raised SoftBank’s rating to BB+ from BB in May, still one step below investment grade.

SoftBank’s underwriting fees are still more than double those for other retail bonds sold this year on average, according to data compiled by Bloomberg.

Fees tend to go down as the creditworthiness of issuers increases as it reduces underwriting risk and the cost of selling to investors, said Toshiyasu Ohashi, a senior managing director at Daiwa Institute of Research Ltd. Competition to manage debt deals is intensifying in Japan, with brokerages rushing to underwrite debt rated at least A, which is considered about the lowest grade that investors would accept, he said.

The creditworthiness of Japanese companies has been on the rise in recent years, with JCR lifting 99 ratings in 2023, up from 94 in 2022 and 50 in 2021. If the cost of issuance declines as a result of upgrades, companies will have an incentive to raise funds through corporate bonds. 

For investors, the risk of default will decrease, making it easier to park their money in debt at time when interest rates are rising as the Bank of Japan moves to normalize monetary policy.

SoftBank has sold ¥1.2 trillion in bonds so far this year, more than five times the amount in the same period of 2023, Bloomberg-compiled data show. The company has also borrowed using margin loans secured by its assets and it’s conducted initial public offerings of companies in which it has invested, such as UK-based Arm Holdings Plc. Deals like those have made SoftBank one of the largest clients for investment banks in Japan.

SoftBank “has been providing a generous and sufficient supply of sales commissions to brokerages for the stability of the retail bond market,” said Yoshimitsu Goto, the company’s chief financial officer. “Recently there have been cases where they do not understand our philosophy and accept sales commissions from other companies at competitively low rates, thus we have changed our policy.”

--With assistance from Finbarr Flynn.

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