Panasonic: The Video Co. That Could Kill The Corporate Bond Lull

A potential U.S. dollar-denominated corporate bond sale from Japanese electronics giant Panasonic (OTCMKTS: PCRFY) may be in the works, amid a likely dearth of new issuance in the holiday-shortened week ahead.

Osaka, Japan-based Panasonic is said to have hired BofA Merrill LynchGoldman Sachs, and Morgan Stanley to arrange a series of meetings with U.S., European and Asian fixed income investors from July 5 through July 9.

According to Bloomberg, the company may sell at least US$500m worth of senior notes in a 144A / Reg S private placement offering, with maturities that could span between 3-years to 10-years.

Market participants expect the transaction to be rated ‘A-’ by S&P and ‘A3’ by Moody’s.

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Panasonic stock has plunged amid faltering auto business

Moody’s Japan K.K. in late May affirmed its investment-grade ‘A3’ credit rating on Panasonic Corp while lowering its outlook to ‘negative’ from ‘stable’.

Moody’s analyst Masako Kuwahara noted that the change in outlook reflects the “increasing uncertainty whether Panasonic can generate sufficient earnings to restore its operating margins over the next few years, given the delays in turning its automotive business profitable.”

In its fiscal 2019 financial results, Panasonic posted a ¥37bn year-on-year plunge in its automotive and industrial systems segment – the largest drop among its units – followed by a ¥21.9bn decline in appliances and a ¥16.6bn decrease in eco solutions.

While the company’s overall operating profit was in positive territory, investors have generally been jittery about the auto segment of Panasonic’s business.

The electronics maker said it will focus on its automotive division in its fiscal year 2020, in part by reforming its management structure, as well as increasing spending on battery production. However, Panasonic said the fixed costs associated with the ramp-up of production at its Dalian and Himeji factories is likely to result in a loss of ¥15bn.

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The author does not hold any positions in the financial instruments referenced in the materials ...

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