Debt ratings of Sony and Panasonic cut to junk status by Fitch

Sony Corp.

Sony Corp.

Fitch, a ratings agency, has slashed the ratings of two Japan’s well-known electronics producers, Sony Corp. and Panasonic Corp., to junk status, underlying their weakness in TV operations and consumer electronics. The fall in the debt ratings of Sony and Panasonic has vastly diminished the glow of these once great electronics brands of Japan.

The Report:

This is the very first time that Sony and Panasonic Corp. of Japan have seen their debt ratings fall to a junk level in their long glowing history. The rating agency Fitch has underlined that the low level of competence and struggling balance sheets were one of main reasons for this fall in the debt ratings of Sony and Panasonic. Rivals in the worldwide electronics sector like Samsung Electronics Co. and Apple Inc. have left the Sony and Panasonic Corp. of Japan quite far behind in recent times. According to the reports, Fitch has slashed the ratings of Japan's Sony Corp. by almost three marks and that of the Panasonic Corp. of Japan by about two levels to the BB. These ratings indicate the fact that both of the firms are most likely to default in their debt.

The present condition:

The cut in the debt ratings of Sony and Panasonic is below the investment grade and the companies are most likely going to struggle in the midst of strong Yen as well as dwindling economic conditions not only at home but also overseas. Sony and Panasonic Corp. of Japan have been reining the electronics market of Japan since the 80s but are now resorting to selling their assets, cutting jobs and closing some of their plants. The three notches degradation of Japan's Sony Corp. came after the maker of Vaio laptops and Play station gaming consoles announced their plans of selling some of their convertible bonds in order to accumulate a fund of 150 billion yen or $1.82 billion. The cuts in ratings however came as a result of the competition of the weekends of the display section in their TVs apart from a diluted production of cash from their operations.

The share market status:

The share market status of Japan's Sony Corp. and Panasonic Corp. has also been affected as a result of this fall in the debt ratings of Sony and Panasonic. The shares of Japan's Sony Corp. saw a fall of 4.4 percent on the 22nd of November in Frankfurt. Before the announcement from Fitch the shares stood at a 1.8 percent high in Tokyo thereby reaching 834 yen. As of this year the stock of Sony Corp. is down by as much as 40 percent. Panasonic Corp. of Japan on the other hand saw its shares go down by about 0.6 percent in Frankfurt. The stock in Tokyo trading however saw a growth of as much as 0.7 percent closing in at 407 yen.

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