Moody's cuts Memec

Moody's Investors Service said it rated the proposed new guaranteed secured bank debt of Memec Group Ltd. Moody's also lowered the ratings of its parent, Memec Group Holdings, which are on review for possible downgrade.

More specifically, Moody's lowered Memec Group Holdings' senior implied rating to Ba3 from Ba2 and assigned a B2 senior unsecured issuer rating. Moody's assigned Memec Group Ltd. a Ba2 rating to its $100 million senior secured term loan A and $100 million senior secured revolving credit facility, both maturing in 2009, and assigned a Ba3 rating to the $100 million term loan B maturing 2010.

All the ratings remain on review for possible downgrade pending the outcome of Memec's planned IPO.

Moody's said the IPO, for which a registration statement has been filed, would materially de-lever the company by causing repayment or conversion of parent company discount notes. The issuance of the bank debt is not contingent on the IPO. That new debt, along with cash on the balance sheet, will be used to repay the borrower's high coupon PIK debt.

Moody's said the ratings reflect the potential for Memec to refinance its heavily levered capital structure through the IPO, and also recognize Memec's ability to meet its debt service obligations in the near term.

Ratings are supported by the expectation that Memec will sustain the benefits of operating improvements stemming from the recent recovery in semiconductor demand and from changes made to the company's cost structure during the industry downturn.

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