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Rating Action:

Moody's upgrades Avago's Sub Debt and assigns Baa3 Sr Unsec Issuer Rating; outlook stable

15 Jul 2010

Approximately $580 million of rated debt affected

New York, July 15, 2010 -- Moody's Investors Service assigned a Baa3 Senior Unsecured Issuer Rating to Avago Technologies Finance Pte. Ltd. ("Avago") and withdrew its former Ba2 Corporate Family Rating, Ba2 Probability of Default Rating and SGL-1 Speculative Grade Liquidity Rating. Moody's also raised the rating for Avago's Subordinated Debt to Ba1 from Ba3 and affirmed the Baa2 rating for the company's Senior Secured Revolving Credit Facility. The rating outlook is stable.

The rating actions reflect the company's enhanced business profile, expanding EBITDA, and noteworthy improvements in free cash flow (FCF) and leverage metrics. Adjusted leverage is currently 0.7x total debt/EBITDA. Also reflected is the company's continued good execution of its business strategy by shifting the portfolio mix to higher value proprietary products, which has produced expanded gross margins as well as share gains in the high-end wireless segment. Avago maintains strong intellectual property, which has led to solid market positions in the optoelectronics, CDMA and wired infrastructure segments. Moreover, as a result of successfully targeted R&D investments, the company has advanced its competitive position across new markets and applications. This has led to a continuous pipeline of innovative, leading-edge products, strong design wins and organic revenue growth. With no debt maturities until 2015, Avago's liquidity position remains solid. The combined effect of these positive developments supports the more creditworthy, investment grade profile of the company which is now reflected in Moody's ratings.

Ratings specifically incorporate Moody's expectation that Avago's growth will continue to outpace that of the overall semiconductor market given the company's increasing sole-sourced dollar content in customers' product platforms; exposure to fast-growth mobile devices, particularly in the smart phone segment; exposure to the strengthening PC/notebook market; and increasing demand for its high-end ASIC devices used in enterprise networking and data center applications. Given the broad-based recovery in semiconductor end market demand, Avago's shift to higher margin proprietary products and expanding EBITDA levels, financial performance, free cash flow and liquidity measures are also expected to continue to demonstrate ongoing improvement. Finally, the revised ratings recognize Avago's financial discipline with respect to maintaining strong balance sheet liquidity, and anticipate that leverage will be sustained at or below 1.5x total debt/EBITDA (Moody's adjusted) going forward.

The stable rating outlook reflects Moody's expectation that Avago will maintain its solid market position in optoelectronics and continue to expand share in high-end wireless communications, wired infrastructure, consumer and industrial segments as a result of strong market acceptance of Avago's new products, production ramps from design win activity and new uses for its devices. We expect this should sustain solid organic revenue growth. The outlook also anticipates that gross margin and cash flow expansion will be supported by continued improvement in product mix, focus on cost management and higher capacity utilization.

The following is a summary of today's rating actions and Moody's current ratings for Avago:

Corporate Family Rating - Withdrew former Ba2

Probability of Default Rating - Withdrew former Ba2

Speculative Grade Liquidity Rating - Withdrew former SGL-1

$230 Million (originally $250 Million) Senior Subordinated Notes due 2015 - Upgraded to Ba1 from Ba3

$350 Million (originally $375 Million) Senior Secured Revolving Credit Facility due 2011 - Affirmed at Baa2

The last rating action for Avago was on December 10, 2009, when Moody's upgraded ratings, including the CFR to Ba2, and revised the rating outlook to positive.

The principal methodology used in rating Avago was Moody's Global Semiconductor, published in November 2009 and available on www.moodys.com in the Rating Methodologies sub-directory 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 sub-directory on Moody's website. Moody's subscribers can find additional information in the Avago Credit Opinion published on www.moodys.com.

Co-headquartered in San Jose, California and Singapore, Avago designs, develops, manufactures and sells a broad array of analog/mixed-signal semiconductor components for wireless, wired infrastructure, consumer/computer peripherals and industrial/automotive applications. For the twelve months ended May 2, 2010 (LTM), net revenues were $1.8 billion.

New York
Gregory A. Fraser
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Avago's Sub Debt and assigns Baa3 Sr Unsec Issuer Rating; outlook stable
No Related Data.
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