S&P rates KLA-Tencor notes BBB

S&P said it assigned a BBB rating to KLA-Tencor Corp.'s senior unsecured notes.

The proceeds will be used to partially refinance its existing debt, including borrowings under its revolver, repurchase shares and for general corporate purposes, S&P said.

The agency said it rates the new notes at the same level as the issuer credit rating on the company.

All of the other ratings on KLA-Tencor are unchanged.

The proceeds will be used to partially repay the roughly $900 million outstanding under its revolver, which it used to fund its $3.2 billion purchase of Orbotech Ltd. in February 2019, S&P said.

KLA funded the acquisition with a combination of $1.3 billion in equity and $1.9 billion in cash, the agency said.

S&P said it estimates the company's pro forma leverage, adjusted for surplus cash, is less than 1x.

Over the longer term, the agency said it expects the company to return most of its free operating cash flow to its shareholders through share repurchases and dividends.

The ratings reflect the company's leading market position in process control and yield management solutions in the semiconductor capital equipment industry, along with its strong long-term customer relationships, S&P said.

Those positive factors are partially offset by the potential for industry volatility, the agency said.

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