Moody's raises Broadcom notes

Moody's Investors Service said it upgraded the ratings of Broadcom Technologies Inc.'s 2017 senior notes to Baa2 from Baa3. Concurrently, the agency affirmed Broadcom Inc.'s Baa3 senior unsecured rating and revised their outlooks to positive from stable.

“The upgrade to the ratings of BTI's 2017 senior notes, which are co-issued by BTI and Broadcom Corp., reflects the structural seniority of the BTI notes compared to the debt issued by Broadcom following the release of BTI's and Broadcom Corp.'s upstream guarantees to the debt of Broadcom. The guarantee release was triggered with the reduction of 2017 senior notes outstanding to less than 20% of the total debt of Broadcom on a consolidated basis (currently 17% of the total or 14% if the revolving credit facility were fully drawn),” Moody’s said in a press release.

The notes benefit from a downstream guarantee from Broadcom. Moody's said it expects Broadcom will prioritize redemption of the remaining notes, which mature between 2022 and 2028 and have coupon rates varying from 2.65% to 3.875%.

The outlook reflects an expectation of at least mid-single digits percent revenue growth over the next 12 months driven by content growth in 5G smartphones and continued strong demand from cloud data centers and telecom service providers. “Given the anticipated growth in revenues and profits, Moody's expects that adjusted debt to EBITDA will decrease to below 3x level over the next 12 months,” the agency said.

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