Moody’s provides A3 to Applied Materials debt

Moody's Investors Service said it assigned an A3 senior unsecured rating to Applied Materials Inc.'s proposed debt offering and affirmed the existing A3 senior unsecured rating and Prime-2 short term rating.

The outlook is stable.

The company intends to use a portion of the net proceeds to redeem or repay its outstanding $400 million 2.65% senior notes due June 15, 2016 and the balance for general corporate purposes.

Moody’s said the A3 senior unsecured rating reflects Applied Materials’ strong to leading market positions in several sub segments of the semiconductor equipment market, its solid debt protection measures, and strong liquidity profile.

The agency expects that revenues in the wafer fabrication equipment sector will increase by about 5% over the next year based on spending plans of major customers.

The debt offering will increase financial leverage, though Moody's expects Applied's adjusted gross debt to EBITDA to remain less than 2 times over the next year. Free cash flow to gross debt should be about 30% while balance sheet cash and liquid investments should remain above $3 billion.

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