S&P downgrades GATE

S&P said it lowered the long-term corporate credit rating on Global A&T Electronics Ltd. (GATE) to CCC+ from B-.

The agency also said it lowered the long-term issue rating on the company's senior secured notes to CCC+ from B-, along with its long-term Asean regional scale rating to axCCC+ from axB.

The outlook is negative.

The downgrades reflect the mounting pressure on the long-term sustainability of GATE's capital structure and the rising liquidity risk due to negative cash flows over the next one- to two-years, S&P explained.

In view of the negative cash flow trend, the agency said it believes GATE may have trouble supporting its operations when available cash falls to less than $50 million.

The possibility of a missed interest payment will rise significantly if this current pace of negative cash flow continues, S&P said.

The company's sizable interest expense of about $110 million consumes about two-thirds of annual EBITDA, the agency noted.

Although S&P said it believes GATE's cash balance could be slightly higher at the end of the fourth quarter, this interest burden is not sustainable.

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