S&P downgrade warning sends Toshiba shares falling

Fri Feb 17, 2017 5:27am EST
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By Junko Fujita

TOKYO (Reuters) - S&P Global Inc (SPGI.N: Quote) said in a report on Friday it could cut its rating of Toshiba Corp (6502.T: Quote) credit by several notches should the Japanese firm receive financial support that includes debt restructuring, sending Toshiba stock down 9 percent.

S&P rates Toshiba credit as junk, at CCC+, following downgrades in December and January, after the conglomerate flagged a multi-billion dollar writedown in its nuclear power business. The credit-rating firm expects banks to help Toshiba, including by extending deadlines for loan repayments.

Any further downgrade would prompt banks to charge Toshiba even higher rates for credit, at a time when the conglomerate is dealing with the crippling writedown while still working to recover from a financial scandal in 2015.

"If any financial support includes debt-to-equity swaps or changes in loan conditions, we would consider that as selective default," S&P Global analyst Hiroki Shibata said in a telephone conference later on Friday. "In that event, we might cut its rating by several notches."

Shibata drew comparison with Sharp Corp (6753.T: Quote). In 2015, S&P rated the panel maker's debt 'selective default' after it agreed a 200 billion yen ($1.76 billion) debt-to-equity swap with main lenders Mizuho Bank Ltd [MZFGAE.UL] and Bank of Tokyo Mitsubishi UFJ Ltd.

The next day, S&P raised the rating to junk, at B-, expecting the bailout to strengthen Sharp's finances. But five months later, S&P cut the rating further into junk, to CCC-, as Sharp's main business failed to improve.

On Thursday, Sumitomo Mitsui Financial Group Inc's (8316.T: Quote) banking unit - one of Toshiba's main lenders - said it would provide the conglomerate with as much support as possible. The other main lender is Mizuho Financial Group Inc (8411.T: Quote).

A day earlier, Toshiba executives asked creditors for an extension of a waiver for a loan covenant violation until the end of next month, people familiar with the matter told Reuters.   Continued...

The logo of Toshiba Corp is seen behind a traffic signal at its headquarters in Tokyo, Japan January 27, 2017.    REUTERS/Toru Hanai