S&P Downgrade Sony to BBB+

Credit Ratings Agency Standard & Poors has downgraded Sony from A- to a BBB+ credit rating.  The new rating means S&P think Sony can meet its financial commitments and will not be going bust but it is susceptible to adverse economic positions.

The lowered credit rating will have an effect on Sony’s standing with banks and investment firms: the lower the rating they receive, the less likely banks are to lend the company money. It will also increase any interest rates on future agreements whilst they remain at BBB+.

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Standard & Poors say ‘The outlook is negative, reflecting our view that we could lower the ratings further if we see no meaningful sign of recovery in Sony’s earnings within six to 12 months.’

The key to Sony making a recovery is its TV business and Standard & Poors will only upgrade Sony’s rating if they make recovery in its core business but S&P ‘consider the possibility of such an outcome low at present.’

The downgrade does not seem to have had any effect on the Sony share price as the company had previously warned they may be re-rated by S&P, at the time of writing Sony was trading +1.92% on the day.

The majority of analysts are recommending investors ‘hold’ Sony stocks, a position they have held for the best part of a year. So, although Sony are losing money, the analysts seem to think that a long term recovery is probable.

With the rumoured Apple TV on the horizon the market will become even more competitive and Sony are investing heavily in the next generation of Smart TV’s.  

I hope I have explained everything clearly (I work for commodity broker so know about S&P, credit ratings and the like), but if you are still unclear what the downgraded credit rating means for the long term outlook for Sony it’s this:

“Oh bugger, but nothing to panic about yet.”

Source: Reuters

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5 Comments

  1. Saw this coming after recent news, scary times ahead for all. The PSN “hack” last year must play major part in this, Tsunami/Earthquake – a real annus horribilis.

  2. Im sure Sony will be unhappy to lose their A rating. I know that companies hold their credit rating in high regard and to be downgraded will be a bit of a bane to them should they require further investment in the future. Natural disasters permitting, lets hope they can turn it around.

  3. It could be worse, like Greece for instance.
    japan has also been downgraded AAA- to BBB+.

  4. This all seems a bit stupid and insane, but whatever :3.

  5. And we thought the 10 point rating scheme was bad!

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