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Moody's drags Sony credit rating back from junk

Dec 13. 2016
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By Agence France-Presse

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TOKYO - Moody's on Tuesday dragged its credit rating on Sony back from junk status, saying the Japanese firm's balance sheet has "dramatically improved".

The ratings agency lifted its rating on Sony by one notch to Baa3 -- bringing it back to investment grade -- nearly three years after it cut its view to junk status as Sony wallowed in massive losses.

    Cutting a firm's credit rating to below investment grade can push up its borrowing costs as investors demand a better return for buying its debt.

    The upgrade "reflects the company's financial profile has been dramatically repaired following the extensive decline of the past several years and subsequent restructuring by the company," Masako Kuwahara, Moody's vice president and senior analyst, said in a statement.

    "The company's earnings base, including its important Game and Network Services segment are now on a more sustainable footing, providing it with a more stable earnings base, consistent with an investment grade rating," she added.

    The once-iconic firm has been working to stay profitable after years of huge losses largely linked to a money-losing TV division, under a painful restructuring that has included layoffs and asset sales.

    The ratings upgrade comes a month after Sony's first-half net profit dropped as it was hit by a sharp rally in the yen's value and losses linked to the sale of its battery business.

    It reported a 26 billion yen ($225 million) net profit in the six months through September, down nearly 78 per cent from a year earlier.

    But Moody's said the "cost structure in Sony's electronics business has significantly improved" and "the risk of a deterioration in earnings has receded".

    The firm, best known for televisions and other consumer electronics, has been betting on the success of its PlayStation games business.

    In October, Sony launched its new virtual reality headset, the PlayStation Virtual Reality (PSVR), in Japan and North America, joining Facebook, Samsung and Google in a market that analysts say could boost the global gaming sector.

    PlayStation VR headsets work with PS4 consoles, more than 40 million of which have been sold globally.

    Dozens of software titles for the device are in the pipeline, allowing players to fly like an eagle, drive sports cars in high-speed races and explore castles.


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