Moody's rates Seagate notes Ba1

Moody's Investors Service said it assigned a Ba1 (LGD3, 45%) rating to Seagate HDD Cayman's $500 million senior note offering. The outlook is stable.

The proceeds from the offering will be used for general corporate purposes, including retiring existing debt and capital expenditures.

The agency said Seagate's rating reflects the company's very strong market position within the hard disk drive industry and the stabilization of the historic sales and cash flow volatility in the industry following significant consolidation over the last decade. Given the high operating leverage in the business model, Moody's expects Seagate to generate solid profit and free cash flow over the next couple of years and deliver strong credit metrics compared to other companies also rated at the Ba1 level.

The rating also incorporates the long-term risks presented by Seagate's single business-line focus, current competition and threat of potential product obsolescence and substitution from emerging solid state drive deployments, Moody's said, and the ratings are constrained by the company's shareholder-friendly financial policies.

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