Moody's Investors Service has downgraded the long-term senior unsecured bond ratings of Sony Corporation.
A new report issued by Moody's on Friday moves a rating from "Baa2" to "Baa3" and gives a negative outlook for the Tokyo, Japan-based multinational. According to the analysis, the downgrade is attributed to "Moody's concern that an increasingly rapid deterioration in demand in the digital AV market due to sluggish economic conditions and fast structural changes will weigh more heavily on Sony's earning than previously expected."
The credit rating agency says that Sony's entertainment-based businesses in pictures and music remains "generally stable," but expresses concern for some of its consumer electronic sectors, particularly flat panel TVs, mobile phones and digital imaging products. If entertainment is at all worrisome, Moody's says it's in Sony's games business.
Moody's is troubled by operating losses in the TV business, which accounts for 11 percent of non-financial services revenue. Sony has cut operating costs here recently, but Moody's points to expected weak sales for the second half of 2012 plus continued fierce competition, that the agency believes will make it tough to deliver a turnaround.
Sony's stable relationships with major banks, a solid liquidity profile, are acknowledged as supporting creditworthiness, but Moody's says that "stress on its balance-sheet metrics has recently increased substantially."
This is the second time in less than a month that Moody's has cut Sony's credit rating. The company now maintains a rating just above a junk grade.
According to Moody's analysts, "The continued negative ratings outlook reflects Moody's view that without robust restructuring in the coming 12-18 months, Sony's non-financial services businesses will at best achieve roughly break-even, and are also at risk of remaining unprofitable."
Sony had no immediate comment on the downgrade.