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Sony's Credit Rating Drops

| 10 Feb 2012 04:22
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Financial services and credit rating agency, Standard & Poor, has lowered Sony's long-term credit and debt rating from A- to a less impressive BBB+.

As one of the so-called "big three" credit rating agencies, S&P's ratings are massively influential. You may recall how late last year, US news agencies were awash with alarmist news of impending financial armageddon. That was due to S&P reducing the nation's credit rating from a nice-shiny AAA to AA+. Thankfully the other two members of the big three didn't follow suit, which, American readers, is why you're reading this in the comfort of your own home, rather than in a shop window as you toast rats over a flaming oil drum. So yes, before you ask, this is kind of a big deal.

"The outlook on the long-term corporate credit rating is negative. 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," read an S&P press release.

This news comes shortly after Sony announced a massive $2.9 billion projected loss for the 2011 fiscal year - which, for those of you who like proper dates that make sense, ends this March. The single-notch downgrade is somewhat mild given Sony's poor performance over the past year, but S&P puts some of the company's financial troubles down to one-off expenses, such as the floods in Thailand which killed nearly 600 people and shut down numerous factories.

While the thus-far poor performance of the PlayStation Vita probably isn't helping, S&P reckons the real problem is Sony's inability to turn a profit on TV sales.

"The outlook on the long-term corporate credit rating on Sony is negative, reflecting our view that we could lower the ratings further if we see no meaningful sign of a recovery in earnings within six to 12 months," the press release continues. "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."

The lowered credit rating is just one of many problems newly appointed CEO Kazuo Hirai will have to face. "I thought turning around the PlayStation business was going to be the toughest challenge of my career, but I guess not," he said during one interview. "It's one issue after another. I feel like 'Holy shit, now what?'"

Source: Reuters Thanks to Saucycarpdog

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