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Investor Service Rates Sony's Credit Rating as 'Junk'


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#1 compl3x

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Posted 28 January 2014 - 08:17

With the internet focusing so heavily on Nintendo's financials, you might think that everything is rosy with its competitors but, as it turns out, Sony also has a weed or two.
 
 
Moody's Investors Service has lowered Sony's credit rating from Baa3 to Ba1, which is a level below investment grade.
 
 
But isn't Sony's new Playstation 4 selling really well?
 
 
Yes, but you have to remember that video games are not Sony's only business and when you look at the entire picture, Sony has had to lower its net profit forecast by 40% and is looking to make $250 million in cuts in its entertainment businesses.  (Heck, even Microsoft reportedly loses $2 billion a year on Xbox.  No one's got it easy.)
 
 
"While Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments," said Moody in a statement, "it still faces challenges to improve and stabilize its overall profitability and, in the near term, to achieve a profile that Moody's views as consistent with an investment grade rating."
 
 
"Of primary concern are the challenges facing the company's TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence.
 
 
"Sony's profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses - such as TVs, mobile, digital cameras and personal computers - to continue to face significant downward earnings pressure."
 
 
Still, Moody's outlook for the company is described as "stable."
 
 
Source: GamesIndustry.biz
 
 
-Reporting from San Diego, GamePolitics Contributing Editor Andrew Eisen
 

 

 

 



#2 +zhiVago

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Posted 28 January 2014 - 08:42

Sensational headline is sensational.

 

"Junk" isn't the kind of terminology Moody's uses. It divides its rating into two big categories: investment grade and non-investment grade (aka speculative).

 

Moody's Investors Service has lowered Sony's credit rating from Baa3 to Ba1, which is a level below investment grade.

 

As it says, it's just one step below investment grade, it's hardly junk. Caa1 and below is junk.



#3 Andrew

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Posted 28 January 2014 - 08:52

Sensational headline is sensational.

 

"Junk" isn't the kind of terminology Moody's uses. It divides its rating into two big categories: investment grade and non-investment grade (aka speculative).

 

 

As it says, it's just one step below investment grade, it's hardly junk. Caa1 and below is junk.

 

It's just industry slang and not the first or last time it'll be used.

 

Fitch said the same thing about Sony in 2012.



#4 OP compl3x

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Posted 28 January 2014 - 09:11

It's just industry slang and not the first or last time it'll be used.

 

 

+1



#5 +zhiVago

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Posted 28 January 2014 - 09:13

It's just industry slang and not the first or last time it'll be used.

 

Fitch said the same thing about Sony in 2012.

 

Journalists whose opinion is worth less than a dime use this slang term. The industry doesn't.

 

If you can find "junk" grade in Fitch's scale (or their press releases), I'll give your post a like!

 

To get a company rated, it has to sign a contract with a rating agency and pay upfront. It's a bit unprofessional to call your clients "junk".



#6 Andrew

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Posted 28 January 2014 - 09:53

Journalists whose opinion is worth less than a dime use this slang term. The industry doesn't.

 

If you can find "junk" grade in Fitch's scale (or their press releases), I'll give your post a like!

 

To get a company rated, it has to sign a contract with a rating agency and pay upfront. It's a bit unprofessional to call your clients "junk".

 

I don't think journalists are responsible for the term and it's certainly not limited to gaming either. It really is just a slang term that is used by investors. Can't say I know the origin but I doubt anyone truly knows either. Just one of those things.

 

Either way, the title is staying as is. GamesIndustry.biz (the root source), are not a sensationalist website nor are they known for click bait.

 

Back on topic



#7 +zhiVago

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Posted 28 January 2014 - 10:00

Sony ADRs @ NYSE (SNE ticker) go for $16 a pop.

 

Truly "junk" shares are usually delisted, trade at OTC exchanges, and cost less than a dollar.



#8 Andrew

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Posted 28 January 2014 - 10:18

Sony ADRs @ NYSE (SNE ticker) go for $16 a pop.

 

Truly "junk" shares are usually delisted, trade at OTC exchanges, and cost less than a dollar.

 

You've quoted Wikipedia already so I assume you won't have a problem with me doing the same.

 

Bonds that are not rated as investment-grade bonds are known as high yield bonds or more derisively as junk bonds.

 

http://en.wikipedia....nvestment_grade

 

You're challenging something here that you won't change, https://www.google.c... rating&tbm=nws



#9 spenser.d

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Posted 28 January 2014 - 12:25

Well they aren't exactly making a splash anywhere but consoles, which don't have a big enough profit margin to make a difference so early on. Their TVs are top line but expensive. They make a ton of money off the movie rights they own, but not enough often enough. Not sure what else there is that brings in a lot of cash for them.

#10 Ironman273

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Posted 28 January 2014 - 12:29

Journalists whose opinion is worth less than a dime use this slang term. The industry doesn't.

 

If you can find "junk" grade in Fitch's scale (or their press releases), I'll give your post a like!

 

To get a company rated, it has to sign a contract with a rating agency and pay upfront. It's a bit unprofessional to call your clients "junk".

http://www.davemanue...nary/junk-bond/

 

The pertinent part:

As you move down Moody’s list of ratings, you will eventually hit the rating of Ba1. This rating, and any rating underneath of it, is considered to be “junk” status. Bonds with junk ratings are considered to be speculative and of a non-investment grade.


#11 +zhiVago

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Posted 28 January 2014 - 13:24

So what's the point of having eleven "junk" categories if they are all the same? Why segregate non-investment group into eleven subgroups?

 

The point I'm trying to make is that there's a world of difference between Ba1-rated securities and the truly worthless Caa- to C-rated junk toilet papers. Sony's current market price of $16.23 per share proves this. To the journalists who write these type of articles and use the term "junk" inappropriately, there's no difference.



#12 Ironman273

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Posted 28 January 2014 - 13:48

Just from the Wikipedia link you posted it should be clear.  Look at the chart with all the bonds.  You have a high number on the left, then it gets grouped in the middle column and then further simplified in the right column.  Because of the fact that there are so many ratings there needs to be an easier way to classify good and bad bonds.  Ba1 just happens to be the point where bad starts.  You're arguing that it's the best bad there is.  The term junk is used because that's what all the not-prime bonds are called. If you want to get the message across to non-investment savvy people that they should stay away from it you classify it as junk.



#13 Hum

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Posted 28 January 2014 - 13:49

Oddly enuff, I don't own any Sony products. :shifty:



#14 +Audioboxer

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Posted 28 January 2014 - 13:51

Sony need to get better at this game.



#15 trooper11

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Posted 28 January 2014 - 15:41

Its easy to forget that Sony is much more than a gaming company and they aren't exactly doing great in other areas.

I really don't want to see Sony forced into serious cutbacks that might affect their gaming division.

They are in the middle of restructuring, so hopefully this is just the bottom and they recover from here.