S&P downgrades Toshiba

S&P said it lowered the long-term corporate credit rating on Toshiba Corp. to B- from B, along with its senior unsecured debt rating to B+ from BB-.

The agency also said it placed the ratings on CreditWatch with negative implications.

S&P also said it placed the company’s B short-term corporate credit and commercial-paper program ratings on negative watch.

The downgrades are in response to news that Toshiba might recognize several ¥100 billion in impairment losses related to its U.S. nuclear energy business, the agency explained.

Toshiba said that as a result of evaluating the value of the U.S. nuclear energy business it acquired through Westinghouse Electric Co. LLC in 2015, it assessed goodwill on the assets to be several ¥100 billion, far exceeding its initial estimates, S&P said.

Therefore, Toshiba is likely to suffer impairment losses on all or part of the goodwill in fiscal 2016, which ends March 31, 2017, the agency said.

Toshiba, thanks to strong sales of flash memory devices in its main storage business, had expected to recover its consolidated operating income to a robust profit level in fiscal 2016, S&P noted.

However, profitability in the flash memory business is highly volatile, owing to the market's variable nature, the agency said.

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