Hong Kong, September 01, 2016 -- Moody's Investors Service has today downgraded STATS ChipPAC Pte.
Ltd.'s corporate family rating and senior secured bond ratings
to B3 from B2 and its unsecured bond rating to Caa1 from B3.
The rating outlook is negative.
Rating Actions:
..Issuer: STATS ChipPAC Pte. Ltd.
.... Corporate Family Rating, downgraded
to B3 from B2
.... Senior unsecured $74.5mm
GTD GLOBAL BONDS due 2018, downgraded to Caa1 from B3
.... Senior secured $425mm GTD GLOBAL
BONDS due 2020, downgraded to B3 from B2
Outlook Actions:
..Issuer: STATS ChipPAC Pte. Ltd.
.... Outlook, maintained Negative
RATINGS RATIONALE
"The downgrade of the company's corporate family rating to B3 primarily
reflects its fragile liquidity position. The company remains reliant
on timely and significant financial support from its parent, JCET,
which has not yet transpired," says Annalisa Di Chiara, a
Moody's Vice President and Senior Credit Officer, and also the lead
analyst for the company.
The company reported just $54 million in cash on its balance sheet
at 30 June 2016, down from $96 million at 31 March 2016.
Moody's also notes that the company has no additional availability
under its existing working capital facilities.
Additionally, there has been no further clarity regarding the status
of Jiangsu Changjiang Electronics Tech Co., Ltd's (JCET,
unrated) application to the China Securities Regulatory Commission with
respect to its agreement with SilTech Semiconductor (Shanghai) Corporation
Limited [unrated, an indirect wholly owned subsidiary of Semiconductor
Manufacturing Int'l Corp. (SMIC, Baa3 stable)], by
which SilTech Shanghai had agreed to sell its 19.61% equity
interest in Holdco A (an intermediary holding company of STATS ChipPAC)
to JCET for RMB664 million.
Moody's expects the delay in obtaining approval for this transaction
will in turn delay JCET's proposed $400 million private placement
with Siltech Shanghai, of which $200 million was earmarked
to fund a portion of STATS ChipPAC's capex in 2016.
Furthermore, Moody's understands from management that the
company has received consent from the lenders of its $315 million
term loan facility to temporarily relax one of its maintenance financial
covenants -- namely maximum leverage covenant - following
STATS ChipPAC's weak operating performance in 1Q2016.
"Given STATS ChipPAC's low profitability, negative free
cash flow and weak liquidity position, the company needs a meaningful
cash infusion -- in the range of at least $50-$100
million - from its parent to help service its interest costs and
cash capex requirements through December 2016. Moreover,
we estimate the company will need an additional $200 million to
$300 million in 2017 to support its operations and maintain sufficient
liquidity," adds Di Chiara
Moody's understands that the company plans to manage its capital
expenditures in 2H 2016 while working on financing alternatives to support
its operations. For example, according to STATS ChipPAC management,
JCET entered into a sale-lease-back transaction with Sino
IC Leasing Co. Ltd [(unrated, a subsidiary of the National
Integrated Circuit Fund (unrated)] to raise $100 million and thus
fund a portion of STATS ChipPAC's eWLB facility expansion.
STATS ChipPAC expects to receive the cash proceeds from the transaction
from JCET in Q3 2016.
The outlook is negative, reflecting the company's weak liquidity
position and weak operating performance. Further downward rating
pressure will build if cash levels fall below $50 million in Q3
2016 or Q4 2016 as result of weak profitability, or if funding from
the expected sale-lease back transaction falls through.
In addition, downward pressure could arise if profitability remains
muted, such that EBITDA is likely to fall below $200 million
at year-end 2016.
Upwards rating pressure is unlikely over the near term, given the
negative outlook.
However, the outlook could return to stable following if sufficient
capital injections from JCET materialize in the near term. Moody's
would also need to see the company restore its liquidity position or obtain
financing to meet its cash obligations through 2017 while maintaining
sufficient cushion under its bank loan covenants.
The principal methodology used in these ratings was Semiconductor Industry
Methodology published in December 2015. Please see the Ratings
Methodologies page on www.moodys.com for a copy of this
methodology.
STATS ChipPAC Pte. Ltd. is a leading service provider of
semiconductor packaging design, assembly, test and distribution
solutions in diverse end market applications including communications,
digital consumer and computing. With global headquarters in Singapore,
STATS ChipPAC has design, research and development, manufacturing
or customer support offices throughout Asia, the United States and
Europe. STATS ChipPAC is a business unit of Jiangsu Changjiang
Electronics Tech Co., Ltd. (JCET, unrated),
a publicly-traded company on the Shanghai Stock Exchange.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Annalisa Di Chiara
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
