Fitch cuts Toshiba

Fitch Ratings said it downgraded Toshiba Corp.'s long-term foreign- and local-currency issuer default ratings and senior unsecured debt rating to BBB from BBB+. The F2 short-term foreign- and local-currency ratings were affirmed.

The outlook is stable.

The downgrades reflect Fitch's expectation that financial leverage for Toshiba will significantly increase due to the higher-than-expected acquisition costs for Westinghouse Electric Co. and the aggressive investment in its semiconductor operations. The agency is also concerned about the financial burden on Toshiba of the inflated $5.4 billion acquisition price. For its 77% interest, Toshiba will invest $4.2 billion, which will be fully debt-funded and significantly increase the company's leverage ratio.

Fitch said Toshiba's increasing dependence on the volatile semiconductor business for its earnings and cash flow generation is another cause for concern.

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