Fitch Ratings downgrades Sony and Panasonic to junk status

Nathan Andrada – Fourth Estate Cooperative Contributor

New York, NY, United States (4E) – Ratings agency Fitch provided another blow to Japan’s struggling consumer electronics companies as it downgraded on Thursday industry giants Sony and Panasonic to junk status.

Fitch lowered Sony’s rating to BB-, down by three notches. Meanwhile, Panasonic’s was cut to BB, lower by two notches.

Fitch became the first to downgrade both companies’ ratings to noninvestment status while Moody’s Investors Service and Standard & Poor’s Ratings Services have also recently downgraded both Sony and Panasonic.

Fitch’s junk rating suggests that the two companies will default on their debt.

The latest downgrade comes as the erstwhile global leaders in consumer electronics seek to improve their finances after suffering losses for many years.

Fitch cited both firms’ weak balance sheets and eroding position in the consumer electronics industry for the decision to slap them with a speculative rating.

In a statement, Fitch noted Panasonic’s declining competitiveness in its key products like televisions and panels, and poor cash generation from its operations.

Fitch’s outlook for Sony, meanwhile, is that recovery will be slow as a result of the declined leadership in its core products due to high competition, slowing demand in advanced economies and the strong local currency, the yen.

Both companies, which have not entered the smartphone and tablet markets, have failed to regain their competitive edge as they lag in marketing and economies of scale, making them unable to compete with the likes of Samsung and Apple.

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