Credit Agency Cuts Sony Debt Rating to Junk Status
TOKYO – Credit ratings agency Fitch said Thursday that Sony Corp.’s corporate debt was no longer investment grade. It downgraded the debt rating on the company to so-called "junk" status for the first time, citing the strong yen and the company’s weakened financial position, amid its challenges in the electronics sector.
Better debt ratings make borrowing cheaper for companies.
Earlier this month, Moody’s Investors Service, another of the big three ratings agencies, cut Sony’s debt to the lowest level of investment grade. Moody's kept Sony at investment grade levels though, signaling that it continues to feel the company is credit-worthy and financially solid. But the firm said it has a "negative" outlook for Sony debt, which means further downgrades are possible.
Sony reported a narrowed loss of $198 million (15.5 billion yen) for the latest quarter, but the conglomerate’s core TV business continues to bleed red ink.
Shigeo Maruyama, former president of Sony Music Entertainment, said in a recent interview with Nikkei, Japan’s biggest business daily, that the success of the PlayStation had made Sony complacent and slow to react to shifts in consumer markets.
Sony is not alone in its debt downgrade. Fitch also cut its rating on consumer electronics giant Panasonic, while the sovereign debt of nearly every major nation has seen its debt rating reduced recently.
The ratings agencies' verdicts continue to attract a lot of attention despite the damage done to their reputations by their infamous triple-A grading of subprime mortgage-backed securities before the collapse of the housing market that caused the financial crisis, which sparked the global recession.