MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services said it affirmed its 'A-' long-term corporate credit rating and its senior unsecured debt ratings on Franco-Italian semiconductor manufacturer STMicroelectronics N.V. (ST), and removed them negative watch.
The ratings were placed on negative watch on April 11, after ST's announcement of its intention to combine its wireless semiconductor business with that of NXP B.V. to form a joint venture. S&P also affirmed the 'A-2' short-term rating, and added the outlook is negative.
The affirmation primarily reflects S&P's opinion that, although ST has to make an upfront payment of $1.55 billion to NXP to obtain an 80 percent stake in the JV and a $350 million cash injection into the JV for working capital, its financial profile remains robust for the ratings, S&P said.
It also noted the potential benefits from the transaction, mainly ST's improved market position in the wireless sector of the semiconductor industry and the expected strong revenue growth and cost savings.
S&P added the affirmation also reflects its expectation that ST will strengthen its financial profile by reducing debt or increasing liquidity reserves by the end of 2009.
The ratings agency said the outlook is negative because of the risk of a one-notch downgrade if ST does not gradually strengthen its financial profile after the upfront payment to NXP in the second half of 2008. TFN.newsdesk@thomson.com ami/npr COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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