Fitch cuts Sony, Panasonic debt ratings to "junk" status

Thu Nov 22, 2012 5:22am EST
 
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By James Topham

TOKYO (Reuters) - Ratings agency Fitch downgraded the debt ratings of Japan's Sony Corp and Panasonic Corp to "junk" status citing weakness in their consumer electronics and TV operations, further diminishing the luster of the once-great Japanese brands.

The cut to below investment grade, the first by a ratings firm, comes as the floundering Japanese tech giants face weak demand and fierce competition from Apple Inc and Samsung Electronics.

A strong yen and bumps in China, where growth has slowed and Japanese goods have been targeted in sometimes violent protests recently, have also weighed on their earnings.

The two companies, along with Sharp Corp, racked up combined losses of $20 billion last year, leading them to axe jobs, sell assets and close facilities.

"Both Sony and Panasonic are struggling to generate operating profits, but each is restructuring and I don't envision the current situation continuing," said Masahi Oda, Chief Investment Officer at Sumitomo Mitsui Trust Bank.

"A collapse of their core business would be a problem, but we are not at the point yet, and to me Fitch looks too negative," Oda added.

Fitch downgraded Sony by three notches to BB-minus from BBB- minus, saying meaningful recovery will be slow. The move came after Sony, the maker of PlayStation game consoles and Vaio laptops, last week announced plans to raise 150 billion yen ($1.82 billion) through the sale of convertible bonds.

"Fitch believes that continuing weakness in the home entertainment and sound and mobile products and communications segments will offset the relatively stable music and pictures segments and improvement in the devices segment which makes semiconductors and components," it said in statement.   Continued...

 
A Sony logo is seen as customers look at Sony digital cameras at an electronics shop in Tokyo, in this May 10, 2012 file photo. REUTERS/Kim Kyung-Hoon/Files