MOODY'S ASSIGNS A2 RATING TO EURO MEDIUM TERM NOTE PROGRAM OF FUJITSU FINANCE (U.K.) PLC AND FUJITSU INTERNATIONAL FINANCE (NETHERLANDS) B.V.
TOKYO, June 1, 1995 -- Moody's Investors Service assigned a A2 rating to the US$500 million Euro Medium Term Note Program jointly established by Fujitsu Finance (U.K.) PLC (Fujitsu PLC) and Fujitsu International Finance (Netherlands) B.V. (Fujitsu B.V.). The rating is based on two separate keepwell agreements between Fujitsu Limited (Fujitsu) and Fujitsu PLC, and between Fujitsu and Fujitsu B.V. The keepwell agreements state, among other things, that Fujitsu agrees to maintain, directly or indirectly, its ownership of all of the voting capital stock of Fujitsu PLC and Fujitsu B.V., to cause them to have a consolidated tangible net worth of at least GBP10,000, in the case of Fujitsu PLC and of Dfl. 10,000, in the case of Fujitsu B.V., and also to cause them to maintain sufficient liquidity to punctually meet their payment obligations. In addition, there is further support for Fujitsu PLC (whose keepwell agreement is governed by UK law) in the form of a "Deed Poll" which effectively strengthens certain rights and benefits of the noteholders under the keepwell agreement.
The rating reflects Fujitsu's leading market position in its core businesses, its sound financial condition, and its excellent technologies. The rating also incorporates that increasing price competition, sluggish domestic capital investments, and the strong yen will continue to affect the company adversely, preventing the company from improving its lower-than historical debt-protection measurements.
Fujitsu's major product, mainframe computers, will continue to be depressed by the softening of global demand, particularly from Japanese financial institutions that represent one of the company's key markets. The rating agency believes that the gross margins of mainframe hardware will decline because of the proliferation of low-cost competing products, particularly personal computers and workstations linked in networks. Fujitsu is trying to expand its personal computer business, where a significant growth in demand is expected. However, severe price competition is likely to accelerate in the personal computer market, which will further squeeze the manufacturers' profit margins.
Fujitsu has been enjoying robust demand for memory chips and their relatively stable prices, which are likely to continue in view of the increasing demand for memories, especially for personal computers. The semiconductor business, however, requires ever-higher capital investments and the industry will undergo intense competition, including competition with strengthening overseas competitors, as costly new generation of DRAM products are introduced. Nevertheless, Fujitsu continues to spend heavily on research and development to maintain its global leadership across a broad range of high technology products.
Fujitsu Finance (U.K.) PLC, headquartered in Uxbridge, U.K., is a wholly owned finance subsidiary of Fujitsu. Fujitsu
International Finance (Netherlands) B.V., headquartered in Amsterdam, The Netherlands, is also a wholly owned finance subsidiary of Fujitsu. Fujitsu Ltd., headquartered in Tokyo, Japan, is the world's second largest computer manufacturer and a leading producer of telecommunications systems, semiconductors and other electronic components.
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