Panasonic Cut by Moody’s to Level Over Junk on Forecast

Panasonic Corp. (6752), the Japanese electronics maker facing a second straight annual loss, had its long-term credit rating cut to one level above junk by Moody’s Investors Service, which cited challenging market conditions.

The company’s long-term rating was lowered two levels to Baa3, the lowest among Moody’s 10 investment-level rankings. Panasonic’s Prime-3 short-term rating remains under review for possible reduction, according to a statement from Moody’s, which assigned a negative outlook for the long-term ranking.

Borrowing costs in the corporate bond market have climbed for Panasonic along with Sharp Corp. (6753) and Sony Corp. as record losses and widening deficit forecasts sapped investor confidence in Japanese electronics exporters. This is Moody’s third cut for Panasonic this year and comes as the Osaka-based based maker of televisions, cameras, home appliances and solar panels may need to spend more to close unprofitable units.

“Panasonic may need to undertake additional restructuring measures,” Moody’s said yesterday. “Challenging market conditions will continue to hinder the timely recovery of Panasonic’s financial profile.”

Net debt rose to about 1.1 trillion yen as of September from 740 billion a year earlier, according to Moody’s, which initiated its latest review of Panasonic’s rating on Nov. 1.

Borrowing Costs

The extra yield investors demand to own Panasonic debt has more than tripled since Oct. 31, the day the company forecast its second-biggest loss, raising refinancing costs as 150 billion yen of notes mature in March, according to data compiled by Bloomberg.

The spread on Panasonic’s 1.081 percent bonds due March 2018 has jumped to 203 basis points as of yesterday, compared with about 64 basis points on Oct. 31, according to the Japan Securities Dealers Association.

The maker of Viera televisions and Lumix cameras forecasts a 765 billion yen ($9.4 billion) net loss for the year ending in March 2013. That would be the second-biggest loss in company history after the 772 billion yen net loss in the previous year.

Panasonic fell 3.8 percent to close at 407 yen in Tokyo trading before Moody’s announcement yesterday, extending its loss this year to 38 percent. That compares with this year’s 8.1 percent gain by the benchmark Nikkei 225 Stock Average.

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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