Moody’s Downgrades Toshiba To Baa3 Following Poor Financial Results, Lawsuit

Toshiba, the Japan-based multinational conglomerate, released its financial results on Saturday. Toshiba Group as a whole recorded a consolidated operating loss of 90.5 billion yen ($754 million) and a decline of 228.4 billion yen in operating income for the first six months of FY2015.

"We're lagging behind in restructuring the unit in charge of personal computers, television and home appliances," Toshiba's chief financial officer, Masayoshi Hirata, told a news conference, as reported by Reuters.

The company also made a rather startling disclosure when it said that it has sued five former executives including three former chief executives in connection with an accounting scandal. In a statement released at the news conference, the company said it was seeking 300 million yen ($2.44 million) in damages from former CEO Hisao Tanaka, his two predecessors and two former chief financial officers, Reuters reported.

The Japanese conglomerate has said it overstated profits by ¥155 billion over seven years that prompted the resignation of then-CEO Hisao Tanaka in July, as reported by The Wall Street Journal.

The lawsuit was filed with the Tokyo District Court on Saturday following a report submitted by an independent panel investigating liability of 98 former and current executives for the overstatement of profits over seven years. The panel found that the executives' negligence over questionable accounting practices caused damage to the company, Toshiba said.

Following the dismal financial results, Moody’s downgraded Toshiba Corp to Baa3 from Baa2 and also changed the rating outlook to negative from stable.

"The rating action was prompted by Toshiba's announcement of its 1H FYE3/2016 results, which indicated that profitability and cash flow generation have both declined materially," says Masako Kuwahara a Moody's Vice President and Senior Analyst. "The negative outlook reflects our ongoing concerns over the company's operations and ability to sustainably reduce its current high leverage as well as restructure its operations in a sustainable and profitable manner”.