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Rating Action:

Moody's assigns definitive B1 ratings to FCI, outlook stable

22 Jan 2014

USD280 million first lien facilities rated

Singapore, January 22, 2014 -- Moody's Investors Service today assigned a B1 corporate family rating (CFR) to Fidji Luxembourg (BC4) S.à r.l. (FCI) and a B1 rating to its USD250 million term loan due in 2020. In addition, Moody's assigned a B1 rating to the USD30 million revolving credit facility due 2018, issued by FCI Asia Pte Ltd (FCI Asia), a wholly owned subsidiary of FCI. The outlook on the ratings is stable.

At USD250 million, the size of the term loans is USD50 million or 0.5x turn of leverage lower than considered when the B1 provisional ratings were assigned on December 10, 2013. Proceeds from the term loan, plus cash on hand, were used primarily to fund, among other things, a USD223 million shareholder distribution and shareholder loan repayment. Funds managed by Bain Capital received substantially all of the proceeds, as its majority owners.

RATINGS RATIONALE

The B1 CFR continues to reflect FCI's small scale relative to competitors in the highly cyclical, global electronic connector industry, modest pro forma leverage, of around 2.8x (Moody's adjusted), aggressive financial policies with regards to shareholder returns and an adequate liquidity profile.

FCI's rating benefits from a meaningful market share within the high speed and power (primarily Telecom and Datacom) niche of the global electronic connector market. Despite the high-innovation within this sector, Moody's views it as a mature, rational market despite its competitiveness, and generally supportive of solid margins and through-the-cycle cash generation for FCI.

The B1 rating on the USD250 million first lien term loan due 2020 and USD30 million revolver due 2018 reflects their relative size in the capital structure, accounting for all balance sheet debt. The facilities are pari-passu and benefit from a downstream guarantee from the immediate direct parent entity of FCI and upstream guarantees from certain of FCI's operating subsidiaries. The facilities are guaranteed and secured by group entities representing roughly two thirds of FCI's current total EBITDA and gross assets. Key manufacturing facilities in China, India and Taiwan, representing around a third of the current total EBITDA and gross assets, are excluded from the guarantee and security package, although the security package includes a share pledge over FCI, the term loan borrower, which would allow enforcement over the whole FCI group.

The term loan facility is covenant-lite and does not contain any financial maintenance covenants. The revolver has a springing leverage covenant if certain borrowings, ancillary obligations and unreimbursed drawn letters of credit under the revolving facility or certain ancillary facilities outstanding at the most recent quarter end exceeds 30% of the committed amount of the revolving facility.

The stable outlook reflects our expectation for mid-single digit growth in FCI's key Telecom and Datacom end markets in 2014 and that FCI will participate in the growth at a similar to slightly lower level given its niche position. Accordingly, the outlook incorporates Moody's expectation for a moderate improvement in key leverage, interest coverage and cash flow metrics during the next 12-18 months. Further, the outlook reflects our view that FCI's B1 rating could withstand a 10-15% decline in earnings, resulting from a cyclical industry decline at the current rating level, at expected debt levels.

The ratings could be downgraded if FCI raised debt levels to fund shareholder distributions or transformative acquisitions such that leverage approached 4.0x. If leverage were to increase due to end market cyclicality lowering EBITDA, we would likely maintain ratings until leverage reached 4.5x so long as FCI continued to generate positive free cash flow and maintained cash reserves and full revolver availability. Further, the loss of one or more of its top ten customers would likely increase the likelihood.

The ratings are unlikely to be upgraded in the next 12-18 months given its small scale, niche product focus and private equity ownership. However, upward rating pressure could emerge should FCI commit to debt reduction such that leverage remains below 3.5x and EBITDA margins remain above 16% during a cyclical downturn. In addition, FCI would need to operate with a stronger liquidity profile, likely including large cash balances and full revolver availability.

The principal methodology used in these ratings was the Global Manufacturing Industry published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

FCI, based in Singapore, is a specialized manufacturer of electronic connectors for the telecom, data, commercial, and consumer markets. FCI has a broad customer base in different end markets, operating in over 30 countries. The operating assets of FCI are controlled by a Singapore-based company, FCI Asia Pte Ltd , a fully owned subsidiary of FCI. In October 2005, Bain Capital acquired the assets that formed the current FCI for a total consideration of EUR1.07 billion. FCI reported around USD555 million of revenues for the year ended December 2012.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Brian J. Grieser
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Philipp L. Lotter
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Moody's assigns definitive B1 ratings to FCI, outlook stable
No Related Data.
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