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Rating Action:

Moody's downgrades MEMC debt. CFR to B3; liquidity rating to SGL-3; outlook stable

Global Credit Research - 07 Jun 2012

New York, June 07, 2012 -- Moody's Investors Service downgraded MEMC Electronic Materials, Inc. ("MEMC") Corporate Family Rating (CFR) to B3 from B2 and Senior Notes due 2019 to Caa1 from B3. Moody's also raised the Speculative Grade Liquidity Rating (SGL) to SGL-3 from SGL-4. The rating outlook is stable. These actions close the ratings review opened May 17, 2012.

RATINGS RATIONALE

"The B3 CFR reflects the financial distress in MEMC's solar operations, which we expect will continue to burn cash for the near term due working capital demands and a more challenging financing environment", noted Terry Dennehy, Senior Analyst at Moody's Investors Services. The ratings also reflect our concerns that MEMC's efforts to reduce the cost base of the solar operations may prove insufficient to reach operating breakeven. Nevertheless, we expect that MEMC will receive cash proceeds in excess of $180 million from the sale of four European projects during the second quarter, which should provide MEMC the cash buffer needed to cover MEMC's restructuring charges and the working capital demands of the solar operations.

The Caa1 rating of the Senior Notes due 2019 ("Notes"), which are unsecured, reflects the effective subordination of the Notes to MEMC's $400 million Corporate Credit Facility, which is secured by a lien on all domestic assets.

The revision to SGL-3 reflects the expectation of cash inflow from the near term sale of certain European projects and at least $200 million of cash and access to the corporate revolver.

The stable outlook reflects our expectation that the pace of cash burn will moderate over the near term and turn solidly positive by the second half of 2012 as MEMC better manages the pace of construction in the solar operations and the semiconductor materials business becomes cash generative, and that there will be no further delays in selling the European projects.

The rating could be upgraded if MEMC's restructuring efforts prove successful, and the solar operations become cash generative, such that we believe that the ratio of free cash flow (FCF) to recourse debt (Moody's standard adjustments) will improve to the mid-single digits on a sustained basis.

The rating could be downgraded if there are delays in selling the European projects or we believe that the semiconductor segment recovery will be delayed. There could be a downgrade if we believe that the pace of cash burn will increase due to declining solar project margins, an increase in the pace of solar project construction, or if we believe that the solar operations' trade creditors will cease to offer trade credit, requiring cash payment in advance.

MEMC, based in St. Peters, Missouri, is a supplier of polysilicon semiconductor wafers to semiconductor foundries and integrated device manufacturers. MEMC also develops, constructs, and operates solar energy power projects through its SunEdison LLC subsidiary.

Downgrades:

..Issuer: MEMC Electronic Materials, Inc.

.... Probability of Default Rating, Downgraded to B3 from B2

.... Corporate Family Rating, Downgraded to B3 from B2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 from B3

Upgrades:

..Issuer: MEMC Electronic Materials, Inc.

.... Speculative Grade Liquidity Rating, Upgraded to SGL-3 from SGL-4

Outlook Actions:

..Issuer: MEMC Electronic Materials, Inc.

....Outlook, Changed To Stable From Rating Under Review

The principal methodology used in rating MEMC was the Global Semiconductor Industry Methodology published in November 2009. Other methodologies used include Loss Given Default for Speculative Grade Issuers in the US, Canada, and EMEA, published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Terrence Dennehy
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Jankowitz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades MEMC debt. CFR to B3; liquidity rating to SGL-3; outlook stable
No Related Data.

 

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