Junk rating for bleeding Sony and Panasonic

Japan's iconic TV makers will struggle against the strong yen and weak demand, says Fitch

PUBLISHED : Friday, 23 November, 2012, 12:00am
UPDATED : Friday, 23 November, 2012, 2:21am


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Sony and Panasonic, the Japanese electronics makers reeling from record losses, have had their long-term credit ratings downgraded to junk by Fitch Ratings, citing a weak recovery in the television market.

Sony's rating was cut by three levels to BB-, three steps below investment grade, with a negative outlook, Fitch said yesterday.

Panasonic's was lowered two levels to BB, also with a negative outlook, the ratings company said. Both had their short-term ratings reduced to B from F3.

The companies would struggle amid a strong yen and weakened economic conditions in Japan and overseas, Fitch said.

Japan's two largest TV makers and smaller rival Sharp are suffering from weaker demand and more competition with Samsung Electronics and Apple.

"Meaningful recovery will be slow given the company's loss of technology leadership in key products," Fitch said of Sony. Panasonic's downgrade reflected reduced competitiveness and weak cash generation, the ratings company said.

Shares of Sony, Panasonic and Sharp all sank to their lowest levels in more than 30 years in Tokyo this year as investors remain unconvinced the companies can rebound from mounting losses.

Borrowing costs in the corporate bond market have climbed for the three as record losses and widening deficit forecasts sapped investor confidence.

Sony was downgraded to the lowest investment grade on November 9 by Moody's Investors Service, which cited falling demand for its TVs and cameras. Moody's cut Panasonic to the same level on November 20.

Sony posted a net loss of 15.5 billion yen (HK$1.46 billion) for the quarter ended September 30. The company retained its forecast for a full-year net income of 20 billion yen. Sony has posted losses for four years.

Chief executive Kazuo Hirai is cutting 10,000 jobs and selling assets.