Ratings agency Moody's (NYSE:MCO) has downgraded the debt of consumer electronics powerhouse Sony (NYSE:SONY), the ratings firm announced today, pegging the ratings outlook as "negative."

Moody's said Sony's downgrade will affect about $4.2 billion in debt. The agency cited rapidly decreasing demand for products like flat-panel TVs and digital cameras. It noted sluggish economic conditions and the growing use of smartphones.

Moody's said in its press release explaining the downgrade that "without robust restructuring in the coming 12-18 months, Sony's non-financial services businesses will at best achieve roughly break-even" levels. Moody's said ratings could be further hit if "profitability, cash flow, and leverage further deteriorate." 

Ratings given by ratings agencies reflect the creditworthiness or default risk of a borrower. When a company's debt is downgraded, investors seek a higher yield on that debt because it's seen as a riskier investment.

Long-term senior unsecured bonds issued by Sony now carry a Moody's credit rating of Baa3, down from Baa2.

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