* Sharp down 2 pct after annual net loss forecast doubled
* Sharp shares down 75 pct this year, CDS spreads surge
* Fitch joins Moody's, S&P in cutting Sharp rating to junk
* Sony shares gain 2 pct after rise in quarterly profit
* Panasonic shares stabilise after Thursday's 20 pct drop
(Adds Fitch rating cut, updates share prices to closing)
By James Topham and Umesh Desai
TOKYO/HONG KONG, Nov 2 Shares of Japan's Sharp
Corp fell and Fitch Ratings downgraded its debt to junk
status on Friday, a day after it warned of a $5.6 billion net
loss for the year and said it might not be able to survive on
Sharp's stock fell 2.4 percent to 165 yen and has lost
three-quarters of its value since the start of the year, the
worst performer among 2,200 Asian large and midcap stocks,
Thomson Reuters data shows.
Shares of rival Sony Corp rose, however, and
Panasonic Corp's steadied after a slide to their lowest
in more than 30 years, as investors look for signs that Japan's
sprawling tech firms will finally take the tough steps needed to
grapple with more flexible and better-funded foreign rivals.
"Sharp and Panasonic look miserable," said Yasuo Sakuma,
portfolio manager at Bayview Asset Management.
"Investors are hesitant to buy them even though their share
prices look relatively cheap. Nobody can say all the bad news
has been discounted."
Fitch Ratings downgraded Sharp's credit rating by six
notches to B-minus, following cuts by Moody's Investors Service
and Standard & Poor's late last summer. Fitch said it may cut
the rating further, citing looming debt maturities, its limited
access to capital markets and the struggle it faces turning its
Sharp's shares remained above a more than three-decade low
of 142 yen hit last month, buoyed in part by hopes it can forge
an alliance with a high-tech company interested in its display
technology, but traders also noted it had become very expensive
and difficult for short-sellers to borrow more shares to sell.
The company, whose displays are used in Apple Inc's
iPads and iPhones, foundered as the strong yen boosted the costs
of manufacturing in Japan and it struggled to compete with
foreign rivals such as Samsung Electronics Co. It
was forced in September to seek a bailout from its banks.
SHUNNED BY DEBT MARKETS
Effectively shunned by the debt capital markets because of
its massive losses and falling market share, Sharp received a
guarantee for 360 billion yen ($4.5 billion) in loans from its
two main lenders, Bank of Tokyo-Mitsubishi UFJ and
Mizuho Corporate Bank.
The loans are enough to sustain the company through its next
financial year to March 2014, which includes the redemption of
200 billion yen in convertible bonds next September, Sharp Chief
Financial Officer Tetsuo Onishi told a briefing on Thursday.
Worries about its cash liquidity have mounted in the credit
markets, where the cost of insuring Sharp's debt has jumped more
than 30-fold since the start of the year and is now more than 10
times the cost for Sony and Panasonic.
Fears that Sharp may default have also led CDS traders to
demand fees upfront, a practice only used in the past for debt
with very high yields or for very risky firms. Moreover, that
fee has skyrocketed to 67 percent, from 20 percent in July.
Osaka-based Sharp, which also makes solar panels, nearly
doubled its forecast full-year net loss to 450 billion yen after
booking a $1.1 billion restructuring charge in July-September.
The agreement with its banks requires it to return to the black
on an operating basis in the second half of the year to March.
"Sharp expects major earnings improvement in the second half
as it posted greater inventory and capital write-downs in the
first half than planned, and plans to cut personnel and other
fixed costs," Goldman Sachs said in a research note.
"However, sales guidance for small/midsize LCDs and solar
cells looks optimistic, and we think second half guidance looks
The Aquos TV maker has been in talks for months with
Taiwan's Hon Hai Precision Industry Co Ltd, which is
considering becoming the century-old Japanese firm's biggest
shareholder, but said it is looking at other alliances as well.
The company has denied Japanese media reports, however,
saying it is in talks on financial tie-ups with U.S. technology
companies such as Apple, Intel Corp, Microsoft Corp
and Google Inc.
Sony eked out a small quarterly operating profit, helped by
the sale of a non-core chemicals business, and kept its forecast
for a full-year operating profit of 130 billion yen. Its shares
rose 2.1 percent to 934 yen on Friday.
Panasonic Corp started off the latest round of bad
news for Japan's big consumer electronics makers on Wednesday,
saying it will lose 765 billion yen this business year as it
writes down goodwill and assets and plans more restructuring.
That would boost Panasonic's cumulative loss over five years to
nearly $25 billion.
Panasonic shares dipped 0.7 percent to 411 yen, steadying
after a 20 percent tumble on Thursday. Japan's benchmark Nikkei
average rose 1.2 percent.
($1 = 80.1400 Japanese yen)
(Additional reporting by Dominic Lau and Taiga Uranaka in
Tokyo, Anshuman Daga in Singapore; Editing by Edmund Klamann)