Sony Corp’s massive write-off of goodwill on its movie business (CI No 2,547) has prompted Standard & Poor’s Corp to place its long-term debt ratings of Sony Corp and long-and short-term debt ratings of its subsidiaries on CreditWatch with negative implications. About $7,000m of rated debt is affected. Current ratings are single-A on long-term debt, single-A-minus on subordinated debt and A-1 on short-term paper. The existing ratings already factored in the very low returns achieved to date on the movie business and thus the excessive value at which it was carried on the balance sheet. But the write-off raises questions as to the severity of the problems of the pictures division, and calls for a reassessment of Sony’s overall business profile and long-term strategies, Standard and Poor’s said. Should the writedown be a prelude to further costly restructuring measures, a one-notch downward adjustment of the long- and short-term ratings may be necessary, but if it is little more than an accounting adjustment, an affirmation would follow.
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