Moody’s lifts Cypress loan rating after downsizing

Moody's Investors Service said it affirmed Cypress Semiconductor Corp.'s B1 corporate family rating, B1-PD probability of default rating and SGL-3 speculative grade liquidity rating.

The agency also said it upgraded the ratings on the company's first-lien credit facilities to Ba3 from B1 following the downsizing of the proposed term loan B to $400 million from $700 million.

The outlook is stable.

The proceeds from the $400 million term loan, coupled with an expected issuance of $300 million in senior unsecured debt in the near term, will be used to repay a portion of borrowings under the company's revolving credit facility and fund the pending $550 million acquisition of Broadcom Ltd.'s wireless Internet of Things business, Moody’s said.

The acquisition is expected to close in the third quarter of 2016, the agency said.

The upgrade of the rating on the senior secured credit facilities to Ba3 reflects the lower proportion of senior secured debt in the post-closing capital structure, Moody’s said.

The company’s ratings reflect the risks associated with its debt leverage, which will rise meaningfully following the Broadcom acquisition, the agency said, as well as its exposure to the cyclical nature of the semiconductor industry.

The ratings also consider in a degree of risk related to the integration of Spansion Inc., which is in its later stages, along with the uncertainty relating to a management transition as Cypress seeks a replacement for its former chief executive officer whom recently resigned, Moody’s said.

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