Sony 2015 Annual Report Download - page 76

Liquidity Management and Market Access
An important financial objective of Sony is to maintain the strength of its balance sheet, while securing
adequate liquidity for business activities. Sony defines its liquidity sources as the amount of cash and cash
equivalents (“cash balance”) (excluding restrictions on capital transfers mainly due to national regulations) and
the unused amount of committed lines of credit. Sony’s basic liquidity management policy is to secure sufficient
liquidity throughout the relevant fiscal year, covering such factors as 50 percent of monthly consolidated sales
and repayments on debt that comes due within six months.
Funding requirements that arise from maintaining liquidity are principally covered by cash flow from
operating activities and investing activities (including asset sales) combined and by the cash balance; however, as
needed, Sony has demonstrated the ability to procure funds from financial and capital markets. In the event
financial and capital markets become illiquid, based on its current forecasts, Sony could sustain sufficient
liquidity through access to committed lines of credit with financial institutions, together with its cash balance.
Sony procures funds mainly from the financial and capital markets through Sony Corporation and SGTS, a
finance subsidiary in the U.K.
In order to meet working capital requirements, Sony Corporation and SGTS maintain Commercial Paper
(“CP”) programs that have the ability to access the Japanese, U.S. and European CP markets, subject to
prevailing market conditions. Although the borrowing limits under the CP program, translated into yen, were
838.0 billion yen in total for Sony Corporation and SGTS as of March 31, 2016, there were no amounts
outstanding under the CP programs as of and during the fiscal year ended March 31, 2016.
Sony typically raises funds through straight bonds, CP programs and bank loans (including syndicated
loans). If market disruption and volatility occur and Sony could not raise sufficient funds from these sources,
Sony may also draw down funds from contractually committed lines of credit from various financial institutions.
Sony has a total, translated into yen, of 522.5 billion yen in unused committed lines of credit, as of March 31,
2016. Details of those committed lines of credit are: a 300.0 billion yen committed line of credit contracted with
a syndicate of Japanese banks, effective until July 2018, a 1.5 billion U.S. dollar multi-currency committed line
of credit also with a syndicate of Japanese banks, effective until December 2018, and a 475 million U.S. dollar
multi-currency committed line of credit contracted with a syndicate of foreign banks, effective until March 2016,
in all of which Sony Corporation and SGTS are defined as borrowers. On April 1, 2016, the latter committed line
was renewed and will remain effective until March 2017 and the amount of the line of credit was changed to
500 million U.S. dollars. These contracts are aimed at securing sufficient liquidity in a quick and stable manner
even in the event of turmoil within the financial and capital markets.
In the event of a downgrade in Sony’s credit ratings, there are no financial covenants in any of Sony’s
material financial agreements with financial institutions that would cause an acceleration of the obligation. Even
though the cost of borrowing for some committed lines of credit could change according to Sony’s credit ratings,
there are no financial covenants that would cause any impairment on the ability to draw down on unused
facilities. Furthermore, there are no restrictions on the uses of most proceeds except that certain borrowings may
not be used to acquire securities listed on a U.S. stock exchange or traded over-the-counter in the U.S. in
accordance with the rules and regulations issued by authorities such as the Board of Governors of the Federal
Reserve Board.
On July 21, 2015, Sony Corporation raised 406.0 billion yen in total from the issuance of 87.2 million new
shares by way of a Japanese public offering and an international offering (together, 286.0 billion yen) and the
issuance of convertible bonds with stock acquisition rights (120.0 billion yen). In addition, Sony Corporation
raised 15.7 billion yen from the issuance of 4.8 million new shares by way of third-party allotment on August 18,
2015. Sony Corporation is using 188.0 billion yen of the funds raised by these issuances of new shares to fund
capital expenditures in the Devices segment, and the remainder to fund research and development expenditures in
the Devices segment. In addition, Sony Corporation is using 51.0 billion yen of the funds raised by this issuance
of convertible bonds with stock acquisition rights to fund capital expenditures in the Devices segment and the
remainder to repay long-term indebtedness.
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