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4-Traders Homepage  >  Equities  >  Tokyo  >  Toshiba Corp    6502   JP3592200004

TOSHIBA CORP (6502)
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S&P downgrade warning sends Toshiba shares falling

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02/17/2017 | 11:27am CEST
Logo of Toshiba Corp is seen behind a traffic signal at its headquarters in Tokyo

TOKYO (Reuters) - S&P Global Inc (>> S&P Global Inc) said in a report on Friday it could cut its rating of Toshiba Corp (>> Toshiba Corp) credit by several notches should the Japanese firm receive financial support that includes debt restructuring, sending Toshiba stock down 9 percent.

TOKYO (Reuters) - S&P Global Inc (>> S&P Global Inc) said in a report on Friday it could cut its rating of Toshiba Corp (>> Toshiba Corp) credit by several notches should the Japanese firm receive financial support that includes debt restructuring, sending Toshiba stock down 9 percent.

S&P rates Toshiba credit as junk, at CCC+, following downgrades in December and January, after the conglomerate flagged a multi-billion dollar writedown in its nuclear power business. The credit-rating firm expects banks to help Toshiba, including by extending deadlines for loan repayments.

Any further downgrade would prompt banks to charge Toshiba even higher rates for credit, at a time when the conglomerate is dealing with the crippling writedown while still working to recover from a financial scandal in 2015.

"If any financial support includes debt-to-equity swaps or changes in loan conditions, we would consider that as selective default," S&P Global analyst Hiroki Shibata said in a telephone conference later on Friday. "In that event, we might cut its rating by several notches."

Shibata drew comparison with Sharp Corp (>> Sharp Corporation). In 2015, S&P rated the panel maker's debt 'selective default' after it agreed a 200 billion yen ($1.76 billion) debt-to-equity swap with main lenders Mizuho Bank Ltd [MZFGAE.UL] and Bank of Tokyo Mitsubishi UFJ Ltd.

The next day, S&P raised the rating to junk, at B-, expecting the bailout to strengthen Sharp's finances. But five months later, S&P cut the rating further into junk, to CCC-, as Sharp's main business failed to improve.

On Thursday, Sumitomo Mitsui Financial Group Inc's (>> Sumitomo Mitsui Financial Group, Inc.) banking unit - one of Toshiba's main lenders - said it would provide the conglomerate with as much support as possible. The other main lender is Mizuho Financial Group Inc (>> Mizuho Financial Group, Inc.).

A day earlier, Toshiba executives asked creditors for an extension of a waiver for a loan covenant violation until the end of next month, people familiar with the matter told Reuters.

S&P's Shibata on Friday also said the credit-rating firm was closely watching Toshiba's likely sale of its chip business.

Toshiba initially planned to sell less than 20 percent of its NAND flash memory unit, but is now considering selling most or all the business some time after March 31, a person with knowledge of the matter told Reuters.

The chip business is cyclical and capital intensive but currently generates stable profit, so its sale could essentially be negative for Toshiba, Shibata said.

A Toshiba spokesman said the firm is not in a position to comment on the assessments of credit-rating firms.

Separately, Toshiba said in a stock exchange filing on Thursday that it would buy 3 percent of U.S. nuclear power subsidiary Westinghouse Electric Co LLC from IHI Corp (>> IHI Corp) for $157 million, after the Japanese infrastructure firm exercised an option to sell.

The multi-billion dollar writedown in Toshiba's nuclear business stemmed from a unit owned by Westinghouse.

($1 = 113.4300 yen)

(Reporting by Junko Fujita and Tim Kelly; Editing by Clara Ferreira Marques and Christopher Cushing)

By Junko Fujita

Stocks mentioned in the article
ChangeLast1st jan.
IHI CORP 1.22% 3720 End-of-day quote.-3.13%
MIZUHO FINANCIAL GROUP, INC. 1.13% 197.5 End-of-day quote.-4.91%
S&P GLOBAL INC -0.47% 192.05 Delayed Quote.13.91%
SHARP CORPORATION -5.64% 3345 End-of-day quote.-14.01%
SUMITOMO MITSUI FINANCIAL GROUP, INC. 1.61% 4595 End-of-day quote.-7.15%
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Financials ( JPY)
Sales 2018 4 226 B
EBIT 2018 500 000 B
Net income 2018 651 B
Debt 2018 294 B
Yield 2018 -
P/E ratio 2018 3,88
P/E ratio 2019 1,56
EV / Sales 2018 0,51x
EV / Sales 2019 0,31x
Capitalization 1 858 B
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Mean consensus OUTPERFORM
Number of Analysts 10
Average target price 386  JPY
Spread / Average Target 30%
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Managers
NameTitle
Nobuaki Kurumatani Chairman & Chief Executive Officer
Satoshi Tsunakawa President, Chief Operating Officer & Director
Naoto Nishida Senior Managing Executive Officer
Yasuo Naruke Director & Representative Senior Executive VP
Kouichi Ikeda Independent Outside Director
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