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S&P cuts Sony rating, warns of further downgrade

Sony's incoming CEO Kazuo Hirai takes part in a news conference in Tokyo
Sony's incoming CEO Kazuo Hirai takes part in a news conference in Tokyo

TOKYO (Reuters) - Standard and Poor's cut its long-term debt rating on Sony Corp on Wednesday to BBB+, warning it may drop the consumer electronics giant a further notch within a year unless it shows it can achieve a significant turnaround in profitability.

The rating action will put more pressure on incoming CEO Kazuo Hirai to move quickly to stem losses, particularly in a floundering television unit on course for an eighth straight year of losses amid slumping demand and savage competition from foreign rivals led by Samsung Electronics.

A lower rating mean the company has to pay investors more to borrow or refinance loans.

"We could lower the ratings further if we see no meaningful sign of a recovery in earnings within the next six to 12 months," S&P said in a statement.

"The major reason for the extended losses is Sony's strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices and its high cost structure compared with overseas competitors," S&P said.

Sony warned in an earnings announcement on February 2 that it was heading for a bigger-than-expected $2.9 billion loss in the year ending on March 31.

A day earlier Sony had named Hirai, 51, to succeed Howard Stringer at its helm. Hirai, a 28-year veteran of Sony who is best known for returning the PlayStation gaming unit to profit, takes over on April 1.

S&P estimates that Sony's ratio of total debt to capital will reach 40 percent by the end of March compared with 35 percent a year earlier.

Sony was also downgraded by ratings agency Moody's last month, being cut to Baa1 from A3. Moody's also downgraded Japanese rival Panasonic Corp, citing concerns about continuing losses at its TV unit.

(Reporting by Mayumi Negishi and Tim Kelly; Editing by Michael Watson)

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