Thursday marked the third consecutive session of massive losses for the Tokyo-listed electronic manufacturer Toshiba Corp., after it announced earlier this week a potential writedown amounting to several billion dollars in relation with a US nuclear business. The news spurred activity among ratings agencies. On Wednesday Moodys downgraded Toshibas corporate family rating (CFR) and senior unsecured rating to Caa1 (non-investment grade territory) from B3. The agency also downgraded Toshibas subordinated debt rating to Ca from Caa3. Additionally, the Japanese groups bond yields rose as well as the cost of insuring against its debt.
Toshiba shares closed lower for a seventh consecutive trading session on Thursday. The stock went down 16.98% (JPY 52.90) to JPY 258.70, after falling to as low as JPY 236.70, or a level not seen since May 26th (JPY 228.70). In the week ended on December 25th the shares of the Japanese group lost 3.15% of their market value compared to a week ago, which marked a second consecutive period of decline and also the steepest one since the week ended on November 6th. The stock has extended its slump to 39.16% so far during the current month, following four successive months of gains. In November Toshiba shares appreciated 11.60%.
Approximately $6.5 billion of the conglomerates market value have been wiped off since the announcement on Tuesday.
“The downgrade of Toshibas ratings principally reflects Moodys deepening concerns over the sustainability of Toshibas near-term liquidity, as well as the substantive and rapid erosion of its equity base”, said Masako Kuwahara, lead analyst for Toshiba at Moodys. “Although Toshiba is still assessing the exact amount of the impairment loss, its financial metrics will likely deteriorate further, potentially resulting in a negative equity position”, Kuwahara added.
According to the ratings agency, the downgrade was associated with increasing concerns over corporate governance, more specifically – due diligence for acquisitions.
In addition, the agency stated it “has placed Toshibas ratings under review for a further downgrade, because of Moodys continued concerns over the potential for a further deterioration in Toshibas operating and financial performance, as well as the high level of uncertainty over the ongoing availability of liquidity support from its relationship banks — over the near term — to continue its core businesses.”
At the same time, Toshibas five-year credit default swaps were priced at 437/467 bps on Wednesday in comparison with 75 bps on Monday. The numbers suggested that $437 000 to $467 000 per year for five years would be required in order for Toshiba Corp. to insure $10 million in debt.
The yield on Toshibas 1.68 percent bonds due 2020 rose to 5.57% on Wednesday, up from 1.77% on Tuesday, according to data by Thomson Reuters.
Daily and Weekly Pivot Levels
With the help of the Camarilla calculation method, Fridays levels of importance for the Toshiba stock are presented as follows (in Japanese Yens):
R1 – 263.08
R2 – 267.46
R3 (Range Resistance – Sell) – 271.85
R4 (Long Breakout) – 285.00
R5 (Breakout Target 1) – 300.34
R6 (Breakout Target 2) – 310.94
S1 – 254.32
S2 – 249.94
S3 (Range Support – Buy) – 245.56
S4 (Short Breakout) – 232.41
S5 (Breakout Target 1) – 217.06
S6 (Breakout Target 2) – 206.46
By using the traditional method of calculation, the weekly levels of importance for Toshiba Corp. (6502) are presented as follows (in Japanese Yens):
Central Pivot Point – 449.70
R1 – 461.40
R2 – 476.70
R3 – 488.40
R4 – 500.10
S1 – 434.40
S2 – 422.70
S3 – 407.40
S4 – 392.10