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2012-11-23 05:34:32
TOKYO (Reuters) - Panasonic Corp has a better chance than rival Sony Corp of
surviving Japan's consumer electronics slump because of its unglamorous but
stable appliance business of washing machines and fridges, credit rating agency
Fitch said Friday.
Fitch cut Panasonic's rating by two notches to BB and Sony three notches to BB
minus on Thursday, the first time one of the three major ratings agencies have
put the creditworthiness of either company into junk-bond territory.
Rival agencies Moody's and S&P rate both of Japan's consumer electronic giants
at the same level, just above junk status. Moody's last cut its rating on
Panasonic on Tuesday.
Panasonic "has the advantage of a relatively stable consumer appliance business
that is still generating positive margins", Matt Jamieson, Fitch's head of
Asia-Pacific, said in a conference call on Friday to explain its ratings
downgrades.
But at Sony, he added, "most of their electronic business are loss making, they
appear to be overstretched."
Japan's TV industry has been bested by cheaper, more innovative models from
Samsung Electronics and other foreign rivals, while tablets and smartphones
built by Apple Inc have become the dominant consumer electronics devices.
Investors are focusing on the fate of Sony and Panasonic after another
struggling Japanese consumer electronics firm, Sharp Corp, maker of the Aquos
TV, secured a $4.6 billion bail-out by banks including Mizuho Financial Group
and Mitsubishi UFJ Financial Group.
Sony and Panasonic have chosen divergent survival paths.
Panasonic, maker of the Viera TV, is looking to expand its businesses in
appliances, solar panels, lithium batteries and automotive components.
Appliances amount to around only 6 percent of the company's sales, but they
generate margins of more than 6 percent and make up a big chunk of operating
profit.
Sony, creator of the Walkman, is doubling down on consumer gadgets in a bid to
regain ground from Samsung and Apple in mobile devices while bolstering digital
cameras and gaming.
The latest downgrades will curtail the ability of both Japanese companies to
raise money in credit markets to help fund restructurings of their business
portfolios.
For now, however, that impact is limited, given the support Panasonic and Sony
are receiving from their banks.
In October, Panasonic, which expects to lose $10 billion in the year to March
31, secured $7.6 billion of loan commitments from banks including Sumitomo
Mitsui Financial Group and Mitsubishi UFJ, a financing backstop it says will
help it avoid having to seek capital in credit markets.
Sony, which has forecast a full-year profit of $1.63 billion helped by the sale
of a chemicals business to a Japanese state bank, announced plans to raise $1.9
billion through a convertible bond before the latest rating downgrade.
Thomson Reuters' Starmine structural model, which evaluates market views of
credit risk, debt levels and changes in asset values gives Panasonic and Sony
an implied rating of BB minus. Sharp's implied rating is three notches lower at
B minus.
Standard & Poor's rates Panasonic and Sony at BBB, the second lowest of the
investment grade, while Moody's Investors Service has them on Baa3, the lowest
of its high-grade category. Moody's has a negative outlook for both firms while
S&P sees a stable outlook for Panasonic and a negative one for Sony.
Stock markets in Japan were closed on Friday for a national holiday.
(Reporting by Tim Kelly; Editing by Mark Bendeich)