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Sony's Credit Rating Officially Downgraded to "Junk"

focusfocus The #1 Nigga, I Don't Need No Hype.Posts: 5,362 ✭✭✭✭✭
edited November 2012 in The Arcade
Sony Credit Downgraded to 'Junk'
Right measures have been taken to reverse fortunes.
by Daniel Krupa NOVEMBER 22, 2012

Major credit rating agency Fitch has downgraded Sony's rating to 'junk', along with Panasonic. It has moved its rating from BBB- to BB- and maintained its Outlooks as Negative. (Bonds rated below BBB-/Baa are colloquially known as junk bonds. They are at a higher risking of defaulting and other averse credit events.) This decision strips both companies of an 'investment-grade' rating.

The decision wasn't taken lightly, according to Matt Jamieson, Head of corporate research at Fitch, who said, “This wasn’t an easy decision. But their reputations have been hit so much that it’ll take a long while to crawl back.”

The downgrading reflects Fitch's belief that Sony's recovery will be slow, "given the company's loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen." But it also believes that Sony's growing weakness in the home entertainment and mobile product arenas could be offset by its "relatively stable" music and pictures divisions.

The agency predicts that Sony's operating margins for FYE13 and FYE14 will be negative or minimal, and that the future of the company in FYE15 will ultimately depend on "the success of its turnaround plan".

Back in April of this year, Sony appointed Kaz Hirai as its new CEO, who has since initiated cost-cutting measures and redundancies in an effort to turnaround the company's fortunes.

Fitch acknowledges that the company has so far taken the right measures to combat its recent decline, but there could still be a risk in how they are executed, as well as sustained competition from the likes of Samsung, Microsoft, Nintendo and Apple across almost all of Sony's key products. This could delay or derail the recovery.

“I don't think the banks will push either of these companies [Panasonic was also downgraded] to the wall,” Damian Thong, an equity analyst at Macquarie Securities in Tokyo, told the Financial Times. “But they do need to convince people that tough restructuring moves will be done in good time, while minimizing unnecessary damage to healthy businesses.”

http://www.ign.com/articles/2012/11/22/sony-credit-downgraded-to-junk

SionCo_Town_Michael

Replies

  • blackkevblaziniblackkevblazini Posts: 1,445 ✭✭✭✭✭
    This right here makes me think Sony is gonna pull a Wii next gen and not go apeshit with the bleeding edge tech they packed into the PS3...I don't think they can afford to keep releasing state-of-the-art game hardware they stay lawsing on (*cough*PSVITA*cough*) anymore.
    kevkevblazini.png
    focus
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,643 Regulator
    edited November 2012
    This right here makes me think Sony is gonna pull a Wii next gen and not go apeshit with the bleeding edge tech they packed into the PS3...I don't think they can afford to keep releasing state-of-the-art game hardware they stay lawsing on (*cough*PSVITA*cough*) anymore.

    They probably will too. I'm not sure if it's a good idea for them to copy Nintendo tho, Nintendo will be selling the Wii U hardware at a lost in order to gain on the software but see Nintendo can afford to do that. Nintendo is sitting on mounds of cash, they have forever money, with Sony's razor thin margins if they tried selling hardware at a loss in order to gain on the software they might really go bust or near bankrupt in the playstation division.

    PS3 was a good idea but there's a reason why Nintendo and Microsoft are taking the route to releasing consoles that are more flexible rather than consoles that are too powerful & jacked up on technology. The average gamer doesn't and will never need/use all that power on the PS3.
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    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
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  • focusfocus The #1 Nigga, I Don't Need No Hype. Posts: 5,362 ✭✭✭✭✭
    Sion. wrote: »

    They probably will too. I'm not sure if it's a good idea for them to copy Nintendo tho, Nintendo will be selling the Wii U hardware at a lost in order to gain on the software but see Nintendo can afford to do that. Nintendo is sitting on mounds of cash, they have forever money, with Sony's razor thin margins if they tried selling hardware at a loss in order to gain on the software they might really go bust or near bankrupt in the playstation division.

    Yea, and even so, Nintendo already said that as soon as one Wii U game is purchased along with the system, the whole transaction instantly becomes profitable. Everybody will pick up Mario or at least one game with the console, so that's really smart.

    http://wiiudaily.com/2012/11/nintendo-wii-u-is-profitable-after-just-one-game-sale/

    Anyway, SMH @ Sony needing to put its next console in its Mama's name.

    Sion
  • focusfocus The #1 Nigga, I Don't Need No Hype. Posts: 5,362 ✭✭✭✭✭
    edited November 2012
    Sony to Sell $1.9 Billion of Convertible Bonds

    By Mariko Yasu - Nov 23, 2012 8:42 AM GMT

    Sony Corp. (6758), the Japanese electronics maker reeling from four consecutive annual losses, plans to raise 150 billion yen ($1.9 billion) from convertible bonds to fund an expansion in its first sale of the security in a decade.
    Sony will sell zero-coupon convertible bonds maturing in five years to fund acquisitions and the expansion of imaging- sensor facilities, the company said in a statement today. The conversion price will be set by tomorrow, according to a person familiar with the matter, who declined to be identified because the information is private.
    The sale, the first convertible bond from Sony since 2003, comes after the share price plunged to near three-decade lows earlier this year. Chief Executive Officer Kazuo Hirai is cutting 10,000 jobs and selling assets as he focuses on mobile devices, games and digital imaging to turn around Sony, whose shares dipped to their lowest since 1980 earlier this month.

    “Convertible bonds was probably the only option for Sony,” said Tadashi Fujii, an analyst at Fisco Ltd., a Tokyo- based research company. “Its credit ratings have been cut and an equity finance would lead the shares to decline because of the dilution.”

    The shares fell to 856 yen in Tokyo trading on Nov. 12, their lowest this year and since April 18, 1980. Sony, worth more than $120 billion in 2000, is now valued at about $11 billion. Apple Inc. (AAPL) is valued at $511 billion and Samsung Electronics Co. is at $184 billion.

    The maker of PlayStation game console will use 60 billion yen of the proceeds to invest in CMOS image sensors, 50 billion yen to repay short-term debts for acquiring shares of Olympus Corp. (7733), 10 billion yen to repay borrowings for acquiring Gaikai Inc. and 30 billion yen to repay bonds maturing next year, according to the statement.

    Sony's long-term credit rating was cut one level to Baa3 from Baa2, assigning a negative outlook. The short-term rating was cut to Prime-3, also the lowest investment grade, from Prime-2.
    Earlier this month, Sony posted a quarterly loss of 15.5 billion yen, its seventh straight loss.

    -Bloomberg

    Shit is looking real bleak.

    $749 million to invest in an expansion in CMOS
    $624 million to repay debt used to buy into Olympus
    $125 million to repay debt used to help buy Gaikai
    $375 million to repay the maturity of some other bonds maturing next year (a future debt)

    So of the 1.9bn they are raising here, $1.1bn is simply to repay debt. This is what happens when your credit rating gets lowered. I didn't realize they borrowed to be able to buy into Olympus and Gaikai. You shouldn't go into debt to buy things, even more so when you already were in debt before. Companies sell off bonds all the time, the sad part is that they are zero coupon convertible bonds rather then just regular bonds. Zero coupon bonds don't offer any interest payments. Sony switching to zero coupon bonds suggests they're worried about paying interest on more bonds. As such, zero coupon bonds go for much less in auctions. Sony is offseting this by making them convertible... so they can turn them into stock if they want at the end of the period. Convertible stock basically being a "gamble". So while Sony is afraid to have to pay interest for bonds, they are making their bonds convertible because they are also afraid yields would be too low, so they would have to give away too much money 5 years from now and that would surely break them. So they are trying to create "Pot Odds" more or less by offering to cut into their own profitability more, if the company turns it around.

    Suggesting they are very worried they won't have it turned around in five years. Its all a bit desperate.

    Sion
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,643 Regulator
    edited November 2012
    Mgmt has lost it's marbles... so much wrong with this. Why would anyone buy the convertible bonds if a chunk of the underlying assets are junk ? They won't sell enough of them to cover those bond payments in time and they'll have to dip in their pockets anyways. Got dayum if I were running that ship I tell ya.

    Mind you from an investment standpoint the bonds could be of value, depends on the terms tho.
    IC Moderator and AHH Editor

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    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
    focus
  • joshuaboyjoshuaboy Posts: 10,858 ✭✭✭✭✭
    Sion. wrote: »
    Mgmt has lost it's marbles... so much wrong with this. Why would anyone buy the convertible bonds if a chunk of the underlying assets are junk ? They won't sell enough of them to cover those bond payments in time and they'll have to dip in their pockets anyways. Got dayum if I were running that ship I tell ya.

    Mind you from an investment standpoint the bonds could be of value, depends on the terms tho.


    @Sion what's your say on this? Worth a shot?
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,643 Regulator
    joshuaboy wrote: »
    Sion. wrote: »
    Mgmt has lost it's marbles... so much wrong with this. Why would anyone buy the convertible bonds if a chunk of the underlying assets are junk ? They won't sell enough of them to cover those bond payments in time and they'll have to dip in their pockets anyways. Got dayum if I were running that ship I tell ya.

    Mind you from an investment standpoint the bonds could be of value, depends on the terms tho.


    @Sion what's your say on this? Worth a shot?

    Well... Sony has never been a good co. to being with - ever. The biggest issue over there is mgmt, and bad mgmt can destroys value. Sony has $7.5 billion in the bank and $170 billion in assets (most of this I think comes from Sony Financial SMH), so why would you borrow money from Bill to pay Paul ? As dude said Bow Wow must be giving them financial advice. They might as well use cash to retire those debts, they'll never make a dime from those investments - them shits is write-offs. If they sold assets and used the cash they already have they could have saved their credit rating and with them borrowing so heavily (they've more than doubled short term debts SMMFH this year) I know with their junk rating their not getting capital for cheap (despite capital being so fucking cheap SMFH - once again another dumb move by mgmt).

    Sony's biggest problem is that they're not making any money, revenue is there but they haven't turned a profit in 6 years and that's b/c their costs are too hefty and Europe and Japan are in the toilet. If this profit problem persists we could see Sony eventually go into debt and not come out. What Sony is going to have to do is downsize the company significantly, sell assets like Sony Music (cuz music is free now) and keep Sony Music Publishing, sell Sony Financial cuz them niggas shouldn't be in banking, and dead the 3D technology in their hardware divisions and shake up mgmt (this part is the hardest cuz half the co. is run by Americans and the other half Japanese).

    There could be a good opportunity in the convertible debt offering but it really depends on the terms of the deal, Sony is selling at the lowest it's ever been at in it's history and does have the liquidity - they're just not making money right now. Unless you plan on holding for the long term (well over 10 years) I wouldn't recommend it cuz it's going to take at least 4-5 years for Sony to get back on it's feet. In that time you could find far better companies that are just as cheap.

    IC Moderator and AHH Editor

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    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
  • joshuaboyjoshuaboy Posts: 10,858 ✭✭✭✭✭
    Yea, I was looking long term. I wouldn't go heavy though. I would go heavy on BB because I see things happening when BB10 drops. But with the Sony share so low, a small investment now could be a nice payout 10 to 15 years down the line if they do turn around. Apple. Even think further down the line, maybe 20 years, and it could be a nice retirement bonus.
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,643 Regulator
    joshuaboy wrote: »
    joshuaboy wrote: »
    Yea, I was looking long term. I wouldn't go heavy though. I would go heavy on BB because I see things happening when BB10 drops. But with the Sony share so low, a small investment now could be a nice payout 10 to 15 years down the line if they do turn around. Apple. Even think further down the line, maybe 20 years, and it could be a nice retirement bonus.

    I would also like to add that at Sony's current price it is actually less risky than an investment in Nintendo at the moment. Down the line they WILL bounce back but things are just going to be very tough for a while (but keep in mind Sony has never really been a good co. but neither has AIG & still I know a lot of value guys who loaded up during the recession when it hit historic lows).

    RIM is going to be an incredible investment in I think 2 or 3 years (perhaps sooner). Their issues aren't nearly as grave as people think. The BB10 will be a success. After the stock ran up I must've got about 20 calls from people saying they're kicking themselves for not grabbing it when I told them to buy around $6.50-$7 a share LOLOL.
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
  • joshuaboyjoshuaboy Posts: 10,858 ✭✭✭✭✭
    Sion. wrote: »
    joshuaboy wrote: »
    joshuaboy wrote: »
    Yea, I was looking long term. I wouldn't go heavy though. I would go heavy on BB because I see things happening when BB10 drops. But with the Sony share so low, a small investment now could be a nice payout 10 to 15 years down the line if they do turn around. Apple. Even think further down the line, maybe 20 years, and it could be a nice retirement bonus.

    I would also like to add that at Sony's current price it is actually less risky than an investment in Nintendo at the moment. Down the line they WILL bounce back but things are just going to be very tough for a while (but keep in mind Sony has never really been a good co. but neither has AIG & still I know a lot of value guys who loaded up during the recession when it hit historic lows).

    RIM is going to be an incredible investment in I think 2 or 3 years (perhaps sooner). Their issues aren't nearly as grave as people think. The BB10 will be a success. After the stock ran up I must've got about 20 calls from people saying they're kicking themselves for not grabbing it when I told them to buy around $6.50-$7 a share LOLOL.




    Myself included L-)
    Sion
  • RawAceRawAce Posts: 4,800 ✭✭✭✭✭
    shits crazy
    SONY is that brand.
    I grew up with SONY as the coolest shit to have period.
    Playstation,Walkman,TV's, sound systems, laptops

    now to think they are on the outs and may not be on the cutting edge anymore is jus crazy

    I still think the sony walkman mp3 players are better than ipods

  • focusfocus The #1 Nigga, I Don't Need No Hype. Posts: 5,362 ✭✭✭✭✭
    RawAce wrote: »
    shits crazy
    SONY is that brand.
    I grew up with SONY as the coolest shit to have period.
    Playstation,Walkman,TV's, sound systems, laptops

    Yea, I know right. I remember when the name SONY used to mean something back in the 80's and 90's.

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