Credit rating lowered to one grade above junk
TOKYOMoody’s Investors Service trimmed Sony’s credit rating to one grade above junk on Friday. In a statement explaining the downgrade from Baa2 to Baa3, the ratings agency cited Sony’s “weak profitability and cash flow, its challenges in achieving profitability in the TV and mobile phone segments, and the erosion in its global competitive position across different product lines.” The service added that Sony’s overall earnings “will stay weak due largely to prolonged operating losses in TVs and mobile phones, as well as significant declines in earnings from digital imaging products and games.” This is the sixth downgrade since Sony was rated Aa3 in 2003 and the second in under a month. Last week the troubled electronics giant announced its seventh straight quarter in the red, citing a strengthening yen and toughening Asian competition in its core electronics biz as contributing to its woes. Moody’s concluded that Sony “is not expected to reduce debt significantly without resorting to cuts in capital expenditure or the sale of non-core assets.” What those “non-core assets” might be the agency did not specify.