Sharp Corp. Senior Unsecured Debt Rating Raised To #B+# And Taken Off UCO On Revised Issue Rating Criteria

Stocks and Financial Services Press Releases Thursday October 5, 2017 09:17
TOKYO--5 Oct--S&P Global Ratings

TOKYO (S&P Global Ratings) Oct. 5, 2017--S&P Global Ratings today said that it has raised its issue rating on Sharp Corp.'s (B+/Stable/B) senior unsecured debt to 'B+' from 'B' upon completing a review of the issue rating on the Japan-based electronics maker. The review follows publication of our revised issue ratings criteria, "Reflecting Subordination Risk In Corporate Issue Ratings" on Sept. 21, 2017, after which we placed the rating "under criteria observation" (UCO). With our criteria review complete, we are removing the UCO designation from the rating.

The rating action on the company's senior unsecured debt stems solely from application of our revised issue rating criteria and does not reflect any change in our assessment of the corporate credit rating on the company.

Our rating action takes into consideration Sharp's capital structure, including senior unsecured debt. The proportion of secured debt ranked senior to senior unsecured debt exceeds 65% of Sharp's consolidated total debt. Therefore, we adjusted the issue rating downward one notch from the long-term corporate credit rating. In accordance with our criteria prior to the revision, we had adjusted the issue rating downward two notches because the proportion of priority liabilities, such as secured debt, accounted for about 40% of Sharp's total assets.We expect Sharp's main creditor banks to continue to provide support, partly based on the strong creditworthiness of Hon Hai Precision Industry Co. Ltd. (A-/Stable/--), of whose group Sharp is a member. While the possibility exists that bank support will take the form of a debt-to-equity swap (or loan waiver), the company is likely to fulfill its obligations on its other debt. Therefore, we adjusted the rating upward one notch.

As a result, our rating on Sharp's senior unsecured debt is the same level as our long-term corporate credit rating on the company.

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