Hong Kong, March 08, 2019 -- Moody's Investors Service (Moody's) has today upgraded STATS
ChipPAC Pte. Ltd.'s corporate family rating to B2 from B3.
The rating outlook is stable.
RATINGS RATIONALE
"The upgrade reflects the significant reduction in debt following
the sizeable cash injection from its parent Jiangsu Changjiang Electronics
Tech Co., Ltd (JCET) which funded the early redemption of
its senior secured notes," says Annalisa Di Chiara, a Moody's
Vice President - Senior Credit Officer.
In January, JCET injected $479 million of cash into STATS
ChipPAC which was used to redeem the $425 million senior secured
notes due 2020 at 104.25%. As a result, leverage,
as measured by adjusted debt/EBITDA, is expected to remain around
3.0x-3.25x as compared to Moody's original
expectations of around 4.5x for FYE2019.
"This injection is significant as it came in as equity -- not
as a shareholder loan -- and accounts for around half of the $950
million funding STATS ChipPAC has received from JCET since 2016,"
adds Di Chiara.
JCET has shown a track record of consistent financial and operational
support.
With the inclusion of the $780 million acquisition cost paid in
2015, JCET has invested close to $1.8 billion in STATS
ChipPAC over the last 3 years.
JCET's financial support for STATS ChipPAC has in part been funded
through the additional investments in JCET itself by its key shareholders,
National Integrated Circuit Industry Investments Fund Co, Ltd (IC
Fund) and Semiconductor Manufacturing Int'l Corp. (SMIC,
Baa3 stable).
Neither IC Fund nor SMIC have a direct interest in STATS ChipPAC although
both have direct stakes in JCET. In fact, both participated
in JCET's private placement -- which raised around RMB3.6
billion in late 2018 -- resulting in IC Fund's ownership in
JCET climbing to 19.0% (from 9.54%) while
SMIC contributed RMB517 million to maintain its 14.28% shareholding.
The proceeds from JCET's private placement were ultimately used
to fund the most recent $479 million cash injection into STATS
ChipPAC.
"We view the shareholders' investments as evidence of STATS ChipPAC's
and JCET's strategic importance to China's integrated circuit industry.
And we expect such shareholder support and commitment to continue over
the next 12-24 months, particularly considering STATS ChipPAC's
debt-service obligations through August 2020", adds
Di Chiara.
STATS ChipPAC reported just $116 million in cash on its balance
sheet at 30 September 2018, and the company has no additional availability
under its existing working capital facilities. Through March 2019,
the company has around $100 million of amortization payments due
on its $315 million syndicated bank loan. This bank loan
matures in August 2020.
The B2 rating also reflects the company's leading market position in the
global outsourced semiconductor assembly and test (OSAT) industry.
The outlook is stable, reflecting the expectation of continued financial
support from JCET to help ensure adequate liquidity -- with a minimum
cash balance of around $50 million -- and compliance with
bank loan covenants. Moody's also expects leverage,
as measured by adjusted debt/EBITDA, to remain under 4.0x.
Furthermore, the stable outlook assumes timely refinancing of the
company's syndicated bank loan in August 2020.
Upward rating pressure is unlikely over the near term, given the
recent upgrade. However, the rating could be upgraded over
the longer term if (1) if STATS ChipPAC successfully refinances its upcoming
debt maturities -- including bank debt and shareholder loan -
in a way that improves the company's liquidity profile, (2)
there is evidence of continued financial support from JCET, or (3)
significantly improves free cash flow generation.
Downgrade rating pressure could arise if (1) the company's cash levels
are sustained below $50 million as a result of weak profitability,
or (2) continued financial support from JCET fails to materialize.
In addition, downward pressure could arise if EBITDA trends below
$180 million or if a debt restructuring were to materialize,
resulting in a failure by STATS ChipPAC to meet its debt service obligations
as outlined in its original debt agreements.
The principal methodology used in this rating was Semiconductor Industry
published in July 2018. Please see the Rating 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. JCET is 19.0%
owned by the National Integrated Circuit Industry Investments Fund Co,
Ltd and 14.3% owned by SilTech Semiconductor (Shanghai)
Corporation Limited (SilTech), an indirect, wholly owned subsidiary
of Semiconductor Manufacturing Int'l Corp. (Baa3 stable).
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
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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
Client Service: 852 3551 3077
Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 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
Client Service: 852 3551 3077
