Shares in Toshiba fell more than 19% on Thursday, the third day of heavy losses after the Japanese tech-to-nuclear conglomerate said earlier this week that it faced a potential multibillion-dollar writedown.
The latest plunge in the shares follows a 20% drop on Wednesday and a 12% slide on Tuesday, wiping about $6.5bn (£5.3bn) from the group’s stock market value this week.
Bond yields have also surged and the cost of insuring against its debt has soared.
Earlier this week, Toshiba said cost overruns at CB&I Stone & Webster, a US nuclear business it bought from Chicago Bridge & Iron last year, meant it could face several billion dollars in charges, acknowledging a bruising overpayment.
Ratings agencies were quick to respond. Late on Wednesday, Moody’s became the second agency to downgrade Toshiba, pushing its rating deeper into junk, or non-investment grade territory, from B3 to Caa1.
“Although Toshiba is still assessing the exact amount of the impairment loss, its financial metrics will likely deteriorate further, potentially resulting in a negative equity position,” said Masako Kuwahara, Moody’s lead analyst for Toshiba.
Moody’s said the downgrade also reflected mounting concerns over corporate governance, especially in relation to due diligence for acquisitions. It said the ratings were under review for another downgrade because of the “potential for a further deterioration in Toshiba’s operating and financial performance”.
The cost of insuring against a Toshiba credit default had soared by late Wednesday in the most actively traded London market. Five-year insurance, or credit default swaps, were quoted at 437/467 basis points (bps) compared with 75 bps on Monday.
The quote suggested it would cost between $437,000 and $467,000 a year for five years to insure $10m in bonds.
Toshiba bond yields have also spiked. The company’s 1.68% bonds due in 2020 were yielding 5.57% late on Wednesday, up from 1.77% on Tuesday, Thomson Reuters data shows.