Moody's rates ASAT (Finance) notes B3

Moody's Investors Service confirmed the ratings of ASAT Ltd. and its subsidiaries and assigned a prospective rating of B3 to the proposed senior guaranteed notes due 2011 of ASAT (Finance) Ltd., a new special purpose subsidiary formed to issue the notes.

Ratings confirmed include ASAT Ltd.'s B3 senior implied rating and senior guaranteed note rating as well as its Caa1 senior unsecured issuer rating.

Moody's said the ratings reflect ASAT's weak coverage ratios and high leverage relative to operating profits; sensitivity of top line and cash flow to industry trends; a high level of customer concentration; and the near and medium term operational and financial risks arising from the upcoming move of ASAT's assembly and test operations from Hong Kong to Dongguan, China.

Ratings are supported by ASAT's ability to maintain its overall market position and improve customer diversification following the recent falloff in demand for telecommunications products; the shift toward higher profit margins and services; the potential for longer term cost savings as a result of the move to China; and recent improvements to operating profitability and fixed cost coverage.

The ratings also consider the benefits of extending long-term debt maturities beyond the 2006 maturity date of the existing bonds.

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