Sony Rating Lowered by Moody’s on Concern Cash Flow Is Weak

Sony Corp. (6758), reeling from four annual losses, had its credit rating lowered one level by Moody’s Investors Service, which cited weak cash flow and losses at the company’s television and mobile phone operations.

The rating was cut to Baa2, the second-lowest investment grade, from Baa1, with a negative outlook, Moody’s said in a report today. The decision affects about $4.2 billion in debt, according to Moody’s.

The maker of Bravia televisions and Cyber-shot cameras is struggling to revive profit by cutting costs as rivalry with South Korean makers including Samsung Electronics Co. (005930) pushes down TV prices. Sony cut its annual profit forecast 33 percent on Aug. 2, saying demand slowed more than expected and the Japanese currency strengthened.

“Weak consumer sentiment, fierce global competition, and the impact of the strong yen on cost competitiveness will further hamper its efforts to improve its metrics,” Moody’s said in the report announced after the close of trading today in Tokyo.

Sony shares rose 2.1 percent to 908 yen at the close, compared with a 0.2 percent drop on the benchmark Nikkei 225 Stock Average.

The television maker said last month it would invest 50 billion yen ($637 million) in Olympus Corp. (7733), the world’s largest maker of endoscopes, as part of its strategy to move into the medical-equipment business. The two companies will form a joint venture to make endoscopes and other medical devices, according to a Sept. 28 finance ministry filing.

The investment “will further pressure Sony’s cash flow, making it difficult for it to reduce debt without additional sales of non-core assets,” Moody’s said in the report today.

Moody’s on Aug. 6 placed the company’s credit ratings on review for downgrade, after cutting the long-term rating one level in January.

To contact the reporter on this story: Dave McCombs in Tokyo at

To contact the editors responsible for this story: Michael Tighe at; Frank Longid at

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