Fitch downgrades Sharp to junk as future hangs in balance

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Fitch downgrades Sharp to junk as future hangs in balance

Japan’s Sharp was dealt another blow on Friday as Fitch slashed its credit rating to junk after the embattled electronics giant warned of a massive annual loss, and expressed doubts about its own survival.

The six-notch downgrade was in response to Osaka-based Sharp saying on Thursday it would post a whopping $5.6 billion yearly loss while admitting for the first time it had doubts about carrying on as a viable company.

Fitch said it slashed its view on the maker of Aquos-brand electronics to a rating of B minus, which means its debt was no longer considered a safe, investment-grade bet.

In August, Standard & Poor’s also cut Sharp’s rating to junk status, underlining the severe situation facing the firm, which has warned of thousands of job cuts while shrinking wages for employees - from the factory floor to the executive boardroom - to shore up its bleeding balance sheet.

Fitch’s announcement was the latest piece of bad news for Japan’s once-mighty electronics giants.

The industry has suffered from a laundry list of problems including a high yen, slowing demand in key export markets, fierce overseas competition and strategic mistakes that left their finances in ruins.

“The downgrade reflects growing risks to Sharp’s liquidity position, reinforcing Fitch’s view that the technology company will struggle to turn its business around,” Fitch said in a statement Friday.

Sharp’s cash balance was about $2.75 billion at the end of September, well short of the more than $11 billion worth of debt it has coming due within a year, and it may have trouble securing further bank loans, Fitch said.

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