Toshiba Corp.’s long-term senior bond rating was cut two levels by Moody’s Investors Service to Ba2, its second-highest junk rating, from Baa3. That was followed by a downgrade to sub-investment grade by Standard & Poor’s.
Moody’s also lowered the short-term rating of the Japanese electronics company, the ratings agency said in a statement Tuesday. S&P reduced Toshiba one step to BB+ from BBB- and placed the company on credit watch, it said in a statement.
“We expect that Toshiba’s leverage will stay high over a prolonged period, given that its restructuring costs will exceed our previous estimates, and our expectation of improvement in earnings, if any, for each business segment will be very gradual even after the restructuring," said Masako Kuwahara, a Moody’s senior analyst, in the statement.
The downgrades were prompted by Toshiba’s announcement of its structural reform plan and financial forecast for the fiscal year ending March 31, indicating that earnings and cash flow generation will be significantly below Moody’s previous expectations, the ratings company said.
Toshiba forecast a record 550 billion yen ($4.5 billion) loss for the current fiscal year following an accounting scandal and plans for job cuts and restructuring in its lifestyles segment including televisions, personal computers and home appliances, it said Monday.