S&P downgrades Sharp

Standard & Poor’s said it lowered the long-term corporate credit and debt ratings on Sharp Corp. to CCC+ from B- and its short-term corporate credit and commercial-paper program ratings on the company to C from B.

The agency also said it lowered the long-term corporate credit rating on Sharp International Finance (U.K.) plc to CCC+ and the rating on its commercial-paper program to C.

The outlook on both companies is negative.

A maturing market and intensifying competition in Sharp’s main liquid crystal display (LCD) business have fueled a price drop in excess of forecasts made at the beginning of fiscal 2015, the agency said. This drop substantially hurts the company’s ability to generate earnings, S&P said.

Sharp is talking to multiple companies about drastically restructuring its LCD operation, the agency added. At this point, accurately predicting how the company will restructure is difficult, S&P said.

But, restructuring the increasingly uncompetitive business will lead to massive losses, including further impairment losses, which may again materially erode the company’s equity capital, the agency said.

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