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Sony’s Credit Rating Cut to Baa1 by Moody’s; Panasonic Also Downgraded

Sony Corp. (6758) and Panasonic Corp. (6752) had their credit ratings cut one level by Moody’s Investors Service on concern they will have difficulty turning around their unprofitable television businesses.

Sony’s long-term rating was lowered to “Baa1,” the third- lowest among Moody’s 10 investment grades, the rating company said in a statement today. Moody’s also downgraded Panasonic’s rating one level to “A2,” the sixth-highest.

Moody’s assigned a “negative” outlook to Sony and expressed concern whether the Tokyo-based company will be able to restore earnings and cash flow. Last month, Chief Executive Officer Howard Stringer sold a panel joint venture to Samsung Electronics Co. (005930) as part of a revamp of the TV business after the maker of Bravia TVs forecast a fourth consecutive annual loss, a first since it began trading in 1958.

“Sony has to rebuild its electronics segment, especially the television business,” Yoshiharu Izumi, an analyst at JPMorgan Chase & Co., said in Tokyo today.

Last month, Fitch Ratings downgraded Sony to one level above junk, citing difficulties reviving a money-losing TV business and deals that won’t improve profit.

“Sony’s earnings will remain weak and volatile due largely to its loss-making TV business, which is grappling with severe competition, sharp price declines, and a strong yen,” according to Moody’s.

Shares Tumble

Sony shares rose 3.1 percent to 1,367 yen and Panasonic jumped 4 percent to 653 yen in Tokyo trading today. The downgrades were announced after the stock market closed. Sony’s stock fell 53 percent last year, compared with a 26 percent jump in Apple Inc. shares, an 11 percent gain for Samsung, and a 43 percent tumble for Panasonic.

In November, Sony predicted a fourth consecutive annual loss of 90 billion yen ($1.2 billion) in the year ending in March 2012, reversing an earlier forecast for a profit of 60 billion yen, citing worsening demand for TVs. Sony is the world’s No. 3 TV maker behind Samsung and LG Electronics Inc. (066570)

Sony had also lowered its annual sales target for TVs, personal computers, compact cameras and Blu-ray DVD players.

Standard & Poor’s put Sony’s “A-” long-term ratings on review in November for a possible downgrade, saying there are no signs of a halt to the deterioration in earnings at the TV operations.

Panasonic’s Finances

Mami Imada, a Tokyo-based spokeswoman for Sony, and Akira Kadota, a Panasonic spokesman, declined to comment on the Moody’s downgrades.

Moody’s said the outlook on Panasonic’s rating is also negative, and the downgrade reflected a weakness in the company’s financial profile, which “deteriorated” since the acquisition of stakes in its two major subsidiaries Panasonic Electric Works Co. and Sanyo Electric Co.

Panasonic’s net debt rose to about 550 billion yen in the year ended March 2011 from about 100 billion yen in the prior year, according to the statement.

In October, the maker of Viera TVs forecast an annual net loss of 420 billion yen, citing the impact of a stronger yen and competition in its overseas digital products business. The company disclosed plans in April to eliminate 17,000 jobs to revive profitability.

“Panasonic is unlikely to restore its financial profile in a timely manner,” Moody’s said. “Among the most prominent reasons are continued losses in its TV business and declines in earnings from its semiconductor business.”

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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