M/A-Com Technology Solutions Holdings, Inc
) $450 million senior secured debt was assigned a Ba3 rating by
leading credit rating agency Moody's along with a stable outlook.
Ba3 is a speculative grade rating, and indicates the presence of
substantial credit risk.
M/A-Com's senior secured debt has a limited buffer of
subordinated liabilities, and there are no financial maintenance
covenants for the debt either. These risks are reflected in
Moody's Ba3 rating. On the positive side, the rating expresses
M/A-Com's healthy cash balance, a secure revolving credit
facility and consistent free cash flow generation, all of which
add to its liquidity.
Additionally, M/A-Com was assigned a Corporate Family Rating
(CFR) of Ba3, reflecting its focused specialization in the analog
semiconductor market. Compared with the broader semiconductor
field, this industry is marked by long product life cycles and
steady revenues, which makes its operations more stable.
A negative factor contributing to the speculative grade rating
was M/A-Com's substantial leverage, resulting from its recent
purchase of Mindspeed. The company drew $220 million under a
revolving credit facility to finance the acquisition of
Mindspeed. However, the company is expected to begin deleveraging
soon as it streamlines Mindspeed's cost structure and uses free
cash flow to retire debt.
Moody's ratings are accompanied by a stable outlook as it expects
M/A-Com to seamlessly integrate Mindspeed into its operations.
The Mindspeed acquisition is expected to be accretive to earnings
from the current quarter, as its significant competitive
advantages and financial synergies are realized. In the next
year, their collective revenues are expected to register growth
in high single digits.
M/A-Com presently sports a Zacks Rank #3 (Hold). Other stocks in
the industry that look promising include
Montage Technology Group Limited
ON Semiconductor Corp.
NXP Semiconductors NV
). While Montage and ON Semiconductor sport a Zacks Rank #1
(Strong Buy), NXP holds a Zacks Rank #2 (Buy).
MONTAGE TECH GP (MONT): Free Stock Analysis
MA-COM TECH SOL (MTSI): Free Stock Analysis
NXP SEMICONDUCT (NXPI): Free Stock Analysis
ON SEMICON CORP (ONNN): Free Stock Analysis
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