Sony Debt Rating Downgraded to Junk Status

DOWN: Kaz Hirai

The new Sony CEO doubles the company's projected annual loss to $6.4 billion, its worst ever, and will trim 10,000 jobs. (Big layoffs at the film and TV studios are not expected.)

Ratings firm Moody's cites "the challenges facing the company's TV and PC businesses."

Credit ratings agency Moody's Investors Service said Monday that Sony Corp.’s corporate debt was no longer investment grade, citing challenges in its consumer electronics business.

It downgraded the debt rating on the consumer electronics and entertainment conglomerate, led by CEO Kaz Hirai, to so-called "junk" status. Better debt ratings make borrowing cheaper for companies.

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"While Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments, it still faces challenges to improve and stabilize its overall profitability and, in the near term, to achieve a profile that Moody's views as consistent with an investment grade rating," Moody's said. "Of primary concern are the challenges facing the company's TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence."

But Moody's was more positive on the profitability outlook for Sony's entertainment units. "The four segments of Devices, Imaging Products & Solutions, Music and Pictures are expected to remain profitable, but not at levels, which in aggregate can support an investment grade rating for the overall corporation," it said. T"he Music and Pictures segments are expected to remain profitable -- after an expected one quarter seasonal loss in Pictures -- and supportive of the company's cash flow and profitability."

t added that Sony’s PlayStation 4 console would help earnings at its video games segment, but predited that profits would come in below those reported in previous years.

The downgrade concludes a debt ratings review that Moody's had initiated in November.

Twitter: @georgszalai