Ratings firm Moody states that Sony Corp.’s corporate debt is no longer “investment grade.”
While Sony has been winning the next-gen console war against Microsoft, the company’s other divisions might not be in the same rosy state. Credit ratings agency Moody Investors Service has now downgraded Sony Corp.’s debt rating to “junk” status.
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…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.
Sony’s ratings has been lowered from Baa3 to Ba1, which is one level below investment grade. For reference a junk credit rating means potential investors will be discouraged, and it might also increase the cost of borrowing money for the electronics giant. There is a sliver of bright light for Sony, though, as Moody did acknowledge the chance of an increase in profitability for the company’s video game division, but adds, “not to the extent seen with the profitability level in 2010.”
Sony Corp. is now led by former Sony Computer Entertainment boss Kaz Hirai, who took over for former president and CEO Sir Howard Stringer in 2012.