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S&P upgrades Toshiba after sale of memory chip unit

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S&P upgrades Toshiba after sale of memory chip unit

S&P Global Ratings upgraded Toshiba Corp.'s long-term corporate credit and senior unsecured credit ratings to BB from B after the Japanese electronics company completed the ¥2 trillion sale of its memory chip unit Toshiba Memory Corp.

The rating agency said it expects Toshiba's financial metrics and liquidity to improve substantially because of the sale. The ratings were removed from Credit Watch with positive implications.

S&P said its positive outlook is based on its expectation that the company "will recover its profitability by enhancing its main businesses and focusing on cost reductions."

The rating agency said it could upgrade Toshiba in the next 12 to 24 months if its EBITDA margin moves toward 7% with lower costs and improved operating efficiency and the company shows more stable financial management. S&P said it could revise the outlook to stable if the company's EBITDA margin stays at about 5%.

Toshiba's financial standing benefited from a large capital infusion and sales of assets related to its U.S. nuclear power operations, S&P said. That standing should improve further because of the stable performance and relatively low capital intensity of the company's main businesses, such as infrastructure and energy, and the recent sale of its memory business. The company should maintain a net cash position, with cash and deposits exceeding debt, in the next two years even if it uses funds for shareholder returns or investments for growth, S&P added.

As of May 31, US$1 was equivalent to ¥108.76.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.