Fitch Keeps Sharp on Rating Watch Negative

Wed May 1, 2013 10:29pm EDT

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(The following statement was released by the rating agency) HONG KONG/SEOUL, May 01 (Fitch) Fitch Ratings is maintaining Japan-based Sharp Corporation's (Sharp) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) of 'B-' on Rating Watch Negative (RWN). A full list of rating actions is provided at the end of this commentary. Rating Rationale Weak liquidity: The RWN reflects growing risks to Sharp's liquidity position in the short-term, due to its upcoming debt maturities and limited access to the capital markets, as the technology company struggles to turn around its business. Sharp's cash balance was JPY164bn at end-December 2012, significantly short of the JPY908bn debt and commercial paper maturing in 2013. Significant upcoming maturities: Although Sharp succeeded in raising JPY360bn secured loans from its major banks in September 2012, continuing support from these creditors may not be forthcoming when the loans fall due in June 2013. In addition the company has a JPY200bn convertible bond due in September 2013. Turnaround fragile: The company's Q3FYE13 (financial year ended March 2013) operating income of JPY2.6bn was better than each of the previous four quarters (aggregate operating loss of JYP240bn), and it has forecast an operating profit of JPY11.2bn for Q4FYE13. However, Fitch believes that the company's turnaround plan will continue to be a challenge as its trading position is fragile. Average recovery rating: A 'RR4' Recovery Rating on its local-currency senior unsecured debt rating indicates average recovery (31%-50%) in the event of a default. Rating Sensitivities Fitch aims to resolve the Rating Watch within the next three to six months, depending on further developments on Sharp's liquidity position, including whether the company will continue to receive support from its creditor banks. Negative: Future developments that may, individually or collectively, lead to negative rating action include - failure to obtain further sources of liquidity to meet short-term obligations Positive: As the ratings are currently on RWN Fitch's sensitivities do not currently anticipate developments with a material likelihood, individually or collectively, of leading to a positive rating action. List of rating actions: Long-Term Foreign- and Local-Currency IDRs 'B-' remain on RWN Local-currency senior unsecured rating 'B-' remains on RWN; Recovery Rating is 'RR4' Short-Term Foreign- and Local-Currency IDRs 'B' remain on RWN Contact: Primary Analyst Alvin Lim, CFA Director +82 2 3278 8371 Fitch Ratings Limited, Korea Branch 9F Kyobo Securities Building 26-4 Youido-Dong, Youngdeungpo-Gu Seoul Secondary Analyst Kelvin Ho Director +852 2 2263 9940 Committee Chairperson Steve Durose Senior Director +61 2 8256 0307 Media Relations: Wai Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure. Applicable criteria, 'Corporate Rating Methodology', dated 8 August 2012, are available on www.fitchratings.com. Applicable Criteria and Related Research Corporate Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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