Sony Credit Rating Downgraded To 'Junk' By Fitch Ratings
Sony's credit rating is downgraded to 'Junk' by the Fitch credit rating agency. But what does that mean?
Published on Nov 22, 2012
Sony’s credit rating status has been downgraded to 'Junk' by the Fitch credit rating agency.
Fitch, who has cited Sony’s problems with its reputation as a driving factor behind the decision has also downgraded Panasonic to the same Junk Status, according to the Financial Times.
“This wasn’t an easy decision,” explained Matt Jamieson from the Seoul-based head of corporate research. “But their reputations have been hit so much that it’ll take a long while to crawl back.”
Last Thursday Fitch Ratings docked Sony three notches to BB-, from its previous listing as BBB-. Fitch Ratings is the first ratings agency to downgrade Sony’s standing and the move strips Sony of an investment-grade rating.
This is certainly a knock to Sony’s confidence with the downgrading reflecting the perception of capital it has to invest in new products. According to Financial Times Sony should average $2.5bn in capitol spending over the next few years with the competition, Samsung Electronics and LG Electronics, spending $22bn and $5.5bn respectively.
Though the downgrading certainly highlights that some confidence has been lost in Sony, the BB rating indicates that though it is vulnerable to defaulting on its debuts over time, but there is sufficient flexibility that Sony can continue to service its debut.