Aeon announced that it would purchase additional shares of equity method affiliate The Daiei Inc. in a takeover bid, with the aim of making Daiei a consolidated subsidiary. Major financial indicators for Aeon are likely to deteriorate if Daiei is consolidated into Aeon, because it has been struggling with poor financial performance and a heavy debt burden, including lease obligations. In addition, Aeon may have to increase financial support for Daiei, for renovation or closure of the company's aging stores. We are placing our ratings on Aeon on CreditWatch with negative implications. We will assess prospects for Aeon and Daiei's financial performance and Aeon's financial burden, including expenses to renovate Daiei stores, following the consolidation, and we will then resolve
