According to Reuters, Standard and Poor’s downgrade Sony’s long-term debt rating on Wednesday to BBB+, citing a warning that it may further drop the ratings to further extent unless and until if the Japanese consumer electronics giant shows it can achieve relevant and significant turnaround in profitability.
“The major reason for the extended losses is Sony’s strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices and its high cost structure compared with overseas competitors,” S&P said. S&P estimates, “Sony’s ratio of total debt to capital will reach 40 percent by the end of March compared with 35 percent a year earlier.”
Sony which recently posted its quarter three results of its 2011 fiscal year with an operating loss of $1.2 billion and net loss of $2 billion on revenue of $23.37 billion. The rating action will put an additional pressure on company’s CEO Kazuo Hirai, which the company recently appointed to move quickly to stem losses. A lower rating for the company mean the company has to pay investors more to borrow or refinance loans.