Moody's cuts Sanmina-SCI to SGL-2

Moody's Investors Service said it lowered Sanmina-SCI Corp.'s speculative grade liquidity rating to SGL-2 from SGL-1 and confirmed the corporate family and probability-of-default ratings at Ba3, the $600 million senior unsecured term loan due 2008 at Ba3 (LGD3, 45%) and the $400 million senior subordinated notes due 2013 and $600 million senior subordinated notes due 2016 at B2 (LGD5, 85%).

The outlook is stable.

The confirmation follows Sanmina-SCI's filing of its 10-K report for fiscal 2006 with the Securities and Exchange Commission. The filing has brought the company in compliance with covenants per its borrowing program and removed Moody's concern over the company's liquidity, which was caused by the delay of filing of its financial statements.

As part of the filing, Sanmina-SCI restated financial statements for the past nine fiscal years for a cumulative amount of $224 million due to backdating of stock options. However, the agency said it understands that cash impact is minimal from the restatement.

The ratings reflect the uncertainty surrounding the company's evolving business model, its weak financial performance and deterioration in credit metrics, Moody's said, adding that the lowered speculative grade liquidity rating reflects the contraction in cash flow generation and significant reduction in the company's cash balance to $500 million at the end of fiscal 2006 from about $1 billion a year ago.

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