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29 Jun 2010
Approximately $1.5 billion in debt affected
New York, June 29, 2010 -- Moody's Investors Service revised CommScope Inc.'s
ratings outlook to positive from stable and affirmed its Ba3 corporate
family rating. The change in outlook is driven by CommScope's
significant deleveraging since the December 2007 acquisition of Andrew
Corp. a leading provider of hardware for wireless carriers and
improved overall credit metrics. The company continued to generate
strong levels of cash flow despite the economic downturn which heavily
impacted revenues. We expect the business to recover in the near
to medium term although weakness may continue over the next few quarters.
CommScope has paid down over $1.1 billion in debt since
closing the Andrew acquisition and reduced leverage from just under 5.0x
to 3.0x for the quarter ended March 31, 2010 (on a Moody's
adjusted basis). The company paid down debt from a combination
of free cash flow and issuance of common equity. Through the downturn
management took the necessary steps including reducing the cost structure
of the business as well as improving the capital structure by the issuance
of additional common equity and convertible debt. Despite the downturn,
management improved EBITDA margins from 14.9% in 2008 to
18.3% for the last twelve months ended March 31, 2010
as the integration of Andrew was completed. Credit metrics including
free cash flow to debt of 26% and cash/debt of 38% are very
strong and more reflective of strong Ba or higher rated specialty manufacturing
companies. Nonetheless, the company faces challenges in its
ACCG business unit, its largest segment and producer of antennae
and related products for the wireless industry, which continues
to be impacted by a slowdown in wireless infrastructure spending in key
international markets. Year-over-year declines in
the ACCG business contributed to overall CommScope revenue declines in
the March 2010 quarter. Wireless infrastructure spending is expected
to recover as increased bandwidth demand in developed markets spur carrier
spending and the build outs of developing markets resume, however,
timing remains uncertain and revenues likely not return to the strong
2008 levels in the near term.
The ratings could be upgraded if the company is able to stabilize revenues
while maintaining operating margins and market share in its key businesses,
particularly its wireless components business.
The following ratings were affirmed:
Corporate family rating: Ba3
Probability of Default: Ba3
$400 million Senior Secured Revolving Credit Facility due 2013
-- Ba2, LGD3, 40%
$753 million Senior Secured Term Loan (originally $1.35
billion) due 2014 -- Ba2, LGD3, 40%
$358 million Senior Secured Term Loan (originally $750 million)
due 2013 -- Ba2, LGD3, 40%
Ratings Outlook: Positive
Moody's most recent communication on CommScope was June 17,
2009 when Moody's revised CommScope's ratings outlook to stable
from negative. The principal methodology used in rating CommScope
was Moody's Global Manufacturing Industry Rating Methodology, published
in December 2007 and available on www.moodys.com in the
Rating Methodologies subdirectory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies subdirectory
on Moody's web site.
CommScope Inc., headquartered in Hickory, North Carolina,
is a leading global provider of wired and wireless connectivity solutions
targeted towards cable and telecom service providers as well as the enterprise
market. The company had 2009 sales of approximately $3.0
Matthew B. Jones
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's revises CommScope's ratings outlook to positive
No Related Data.
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