S&P downgrades Macom

S&P said it lowered the credit rating on Macom Technology Solutions Holdings Inc. to B- from B.

The downgrades are based on an adjusted leverage of 11.5x and an expectation for leverage to remain higher than 8x through fiscal 2019, S&P said.

The agency also said it lowered the rating on the company's first-lien secured facilities to B- from B.

Protracted weakness in Macom's telecommunications revenues, combined with tepid demand for data center connectivity products and declining margins, have driven leverage over 10x for the last two quarters, S&P said.

Although the agency said it expects expanding 5G carrier infrastructure spending to support stronger revenues in the second half of fiscal 2019 and a return to positive free cash flow for the year, it believes that leverage will remain elevated, likely higher than 8x over the next 12 months.

The stable outlook reflects an expectation that Macom's operating performance will improve in the second half of fiscal 2019 and into 2020, S&P said.

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