S&P changes Analog Devices to stable

S&P said it revised the outlook on Analog Devices Inc. (ADI) to stable from negative and affirmed its ratings, including the BBB corporate credit and issue-level ratings and A-2 short-term rating.

S&P said the outlook revision reflects its view that Analog Devices is now likely to maintain adjusted leverage in the 2 times to 3 times range over the next two years as it aggressively pays down the debt it incurred as part of the Linear Technology acquisition.

The agency previously expected at the time of the acquisition announcement in July 2016 that adjusted leverage would be near the 4 times area by the close of the acquisition and fall to less than 3 times within two years.

“Over the past year, however, both ADI and Linear exceeded profitability forecasts in our base case scenario given favorable semiconductor market conditions and good growth in their end markets,” S&P said in a news release.

“Given ADI's good market positions within its product portfolio, including Linear's power management products, we expect continued positive revenue and margin expansion over the next two years, as well as rapid debt repayment through cash flow generation.”

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