Don't touch Sony, Panasonic's junk, says credit agency

Pana may grope its way out of misery, though

Panasonic has a better chance than Sony of surviving the global disinterest in new consumer electronics, credit rating agency Fitch said today.

Fitch downgraded the two debt-saddled firms to junk status: Panasonic's credit rating was pushed down two ranks to double-B, and Sony was nudged down three to double-B-minus. Panasonic is still ahead of Sony, meaning Fitch reckons it has a better chance of being able to pay its debts that Sony does.

"[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, told Reuters. "Most of [Sony's] electronic businesses are loss making, they appear to be overstretched."

When a company reaches junk level, it will find it almost impossible to raise money for its business, which can push it over the edge.

All of Japan's major electronic firms are suffering, as folks around the world put off buying new tellies and other big ticket items, while the strong yen eats into their profits and competitors in South Korea get ahead of them.

Sharp has already bagged a 30bn yen (£236m) bailout from banks, while Panasonic has persuaded lenders to part with 600bn yen (£4.7bn).

Most of the firms are also engaged in restructuring: they're trying to find pieces of their business that can survive the downturn and concentrate on that. Panasonic is focussing on appliances, solar panels, lithium batteries and automotive components, while Sony is staying with gadgets, cameras and gaming.

Both companies have also found a way to ride out the year; Panasonic with its bank bailout, and Sony with a full-year profit of $1.63bn after selling its chemicals business to a Japanese state bank and raising $1.9bn through convertible bonds it managed to get out before the ratings downgrade. ®