Strategy, the major Bitcoin treasury firm, is closing in on an upgrade from S&P by slashing debt and enhancing liquidity.
In a significant turnaround, Strategy, the largest Bitcoin treasury firm, has successfully wiped out nearly $8 billion of net debt in less than a year. This shift is not just a financial maneuver; it represents a strategic pivot aimed at improving its creditworthiness and possibly evading its current B- junk rating from S&P Global Ratings. As of September 10, the firm's head of investor relations, Chaitanya Jain, highlighted that the company has fortified its balance sheet in key areas identified by S&P as essential for an upgrade: dollar liquidity, convertible debt, and access to capital markets even during periods of Bitcoin volatility.
S&P bestowed its B- issuer credit rating upon Strategy in October 2025, maintaining it with a stable outlook the following December. This rating remains an area of concern for the company, positioned six notches beneath the investment-grade threshold of BBB-. However, with substantial improvements in liquidity and a drastic reduction in debt, Strategy is keen to push for a reevaluation of their credit rating.
The most notable transformation in Strategy’s financial landscape has been in its liquidity position. Jain reported a staggering increase in dollar liquidity, surging from a mere $54 million on September 30, 2025, to an impressive $6.54 billion as of September 7. This significant liquidity allows Strategy to fund interest and preferred dividends for approximately four years without needing to liquidate any Bitcoin holdings.
In a detailed regulatory filing, Strategy broke down this liquidity into two distinct categories—$5.10 billion in a designated USD reserve and an additional $1.44 billion in cash. The USD Reserve is allocated specifically for interest and preferred dividends, while the cash component can be utilized for Bitcoin acquisitions, stock repurchases, and other capital management initiatives.
This liquidity boost offers Strategy notable flexibility in times of challenging market conditions when issuing new securities can become cumbersome. S&P has, until recently, identified the company's liquidity position as a significant vulnerability, stemming from the mismatch between its obligations, which are priced in dollars, and its primary assets, which are held in Bitcoin. There was concern that a downturn in Bitcoin prices, coupled with a loss of access to capital markets, could force Strategy to sell off Bitcoin at unfavorable prices.
Alongside strengthening its liquidity position, Strategy has actively worked to reduce its total debt further underscoring its commitment to improve its credit profile. The company has successfully decreased its convertible debt from $8.21 billion to $6.71 billion by executing a significant repurchase of $1.5 billion in zero percent convertible senior notes due in 2029, completing this transaction at a discounted price of $1.38 billion, or about 8% below par.
This strategic reduction in debt has consequentially lowered Strategy’s net debt from approximately $8.16 billion to about $174 million as of early September. This recalibrated debt level, when juxtaposed against a strengthened dollar liquidity position, paints a picture of improved financial health.
While these numbers reflect positive changes, they do not completely eliminate all financial burdens. Strategy continues to carry considerable perpetual preferred stock, which comes with persistent dividend obligations that still constitute a component of its overall liquidity strain, as noted by S&P in evaluations of the firm’s creditworthiness.
Another vital area of concern for S&P was the availability of capital. The firm has showcased its ability to maintain access to capital markets, raising an impressive $21 billion in various forms of equity from January to August, despite a tumultuous Bitcoin market that saw prices decline over 30% and dip below $60,000. By contrast, Bitcoin's value has since rebounded to near $80,000, reflecting market recovery and, importantly, continued investor confidence in Strategy.
Consistent capital-raising endeavors enable Strategy to counteract the risks identified by S&P regarding potential downgrade scenarios that could arise from unstable Bitcoin prices impacting its fundraising capabilities. S&P explicitly mentioned that its outlook is contingent on continued market access and the company's resilience to withstand financial pressures.
As it stands, the mixed signals around Bitcoin and the overall market volatility place additional pressure on Strategy's credit outlook. Despite improving metrics on the balance sheet, S&P remains cautious, emphasizing that real systemic risks are still in play regarding Bitcoin’s multi-dimensional impacts on Strategy’s future financial stability.
Despite the substantial advancements made in liquidity and debt reduction, Strategy still faces formidable risks stemming from its concentrated exposure to Bitcoin. Traditionally, the firm has amassed an immense Bitcoin treasury, holding approximately 845,050 BTC acquired for $63.73 billion—a staggering investment at an average price of about $75,412 per coin. This concentrated asset allocation poses marked risks, making the company vulnerable to severe drawdowns in Bitcoin's price.
S&P has highlighted this concentration risk on numerous occasions, noting that the firm's singular focus on Bitcoin and a comparably smaller software division limit its potential for higher credit ratings. Currently, the balance sheet remains precariously tilted towards Bitcoin, which retains its reputation as a volatile asset that can exhibit extreme price fluctuations even in short timeframes.
The fundamental question moving forward is whether the newfound liquidity and just-reduced debt levels can sufficiently hedge against the risks associated with Bitcoin concentration well enough to call for an upgraded rating from S&P. The latest balance-sheet changes have led to a re-evaluation of Strategy's financial profile, but S&P has yet to act on any fresh ratings decisions since they were made.
Jain has remained non-committal about timelines for rating adjustments, emphasizing that any decision regarding upgrades will solely rest in S&P’s hands. As of now, S&P has indicated that an upgrade is unlikely within the next twelve months, a timeline that runs until late October 2026.
As Strategy navigates these financial waters, industry analysts will closely watch how these improvements evolve against the broader backdrop of Bitcoin's market dynamics, and whether they can successfully leverage their expanded liquidity and reduced debt profile to warrant a shift in their standing with credit rating agencies.
Oluwapelumi values Bitcoin's potential and shares insights on various topics including DeFi, hacks, mining, and culture, showcasing the transformative power of these financial innovations.
Also contributing, Gino Matos, a law school graduate and seasoned journalist, leverages six years of crypto industry experience, focusing on Brazilian blockchain developments and implications for the broader financial landscape.