Sony Credit Rating Downgraded by S&P

Standard & Poor’s (S&P) has lowered Sony long-term credit and debt ratings from "A-" to "BBB+," according to an IndustryGamers report. That report also notes that the firm also removed the ratings from CreditWatch, where it dropped them in November of 2011.

"The outlook on the long-term corporate credit rating is negative," S&P noted. "We base the downgrade on our view that severe circumstances in Sony's mainstay electronics businesses make a strong recovery in earnings unlikely. We base the negative outlook on the long-term corporate credit rating on our expectation that we could lower the ratings further if we see no meaningful sign of a recovery in Sony's earnings within six to 12 months. We affirmed the 'A-2' short-term corporate credit rating on the company."

The downgrade in its credit rating comes on the heels of the company's fiscal third-quarter results and news that it expected to post a fiscal full year net loss of $2.89 billion.

The credit rating firm thinks that a quick recovery is not a possibility for the company.

"Standard & Poor's believes the major reason for the extended losses is Sony's strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices, and its high cost structure compared with overseas competitors," read the report. "Circumstances are so severe that Standard & Poor's believes it will be difficult for Sony to return its TV business to profitability even in fiscal 2013. Therefore, we see a low likelihood of a strong recovery in Sony's earnings in the next two years or so."

S&P added that it could lower Sony's credit rating even further if it doesn't see some signs of positive progress in the next six to 12 months.

"We expect strong price erosion and a fall in demand may delay a recovery in earnings in the company's TV segment and lead to further expenses in restructuring," it said.

Source: Reuters by way of IndustryGamers

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