Sony’s financial troubles could be worse than imagined after the company announced it had agreed to sell its New York base to a consortium led by property developers.
In a statement, Sony confirmed they had entered into a contract with The Chetrit Group, a New York-based owner of commercial properties and other major US real estate markets and expect to raise US$1.1 billion from the sale and complete by March 2013.
Rumours have been circulating the Japanese electronics manufacturer was in financial trouble and the sale would appear to justify the reports and allude to Sony trying to raise cash for operations.
The statement adds: “SCA and other Sony businesses (including Sony Music Entertainment, Sony/ATV Music Publishing and Sony Pictures Entertainment, among others) will remain in the building for up to three years under a leaseback arrangement with the purchaser.
“After repaying debt related to the building and other transaction costs, it is expected that Sony will receive net cash proceeds of approximately $770 million. Sony expects to realize a gain on the sale of approximately $685 million to be recorded as operating income.”
Although since Kazuo Hirai, Sony Chief Executive, took over the company it has been doing its best to halt the financial losses, this step will be perceived as one of the more aggressive ones as it looks for ways to cut unnecessary expenditure and raise capital.
The reasons for the sale were explained as: “Sony is undertaking a range of initiatives to strengthen its financial foundation and business competitiveness and for future growth.
“At the same time, Sony is balancing cash inflows and outflows while working to improve its cash flow by carefully selecting investments, selling assets and strengthening control of working capital such as inventory. This sale is made as a part of such initiatives.”