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Fitch downgrades Seagate
Fitch Ratings said it lowered Seagate Technology's issuer default rating to BB from BB+ and raised its secured credit facility (formerly unsecured) to BBB- from BB+.
The agency downgraded Seagate Technology HDD Holdings' issuer default rating to BB from BB+ and senior unsecured debt to BB from BB+, and upgraded its secured credit facility (formerly unsecured) to BBB- from BB+.
The agency also downgraded Maxtor Corp.'s issuer default rating to BB from BB+, senior unsecured debt to BB from BB+ and subordinated debentures to B+ from BB-.
The outlook is negative.
Fitch said the actions follow the grant of a first-lien security interest under the company's second amended and restated credit agreement dated April 3 and resulting subordination of the senior unsecured debt:
The BB issuer default rating reflects declining demand for hard disk drives, especially for desktop personal computers, due to the weak worldwide macroeconomic environment, resulting in excess HDD industry capacity and greater than normal declines in average selling prices, according to the agency.
The downgrades also incorporate the risk of further subordination in the event Seagate issues additional secured debt to refinance $435 million of debt maturing through calendar 2010, Fitch noted.
Ratings are supported by the broad product portfolio and leading market share in the overall HDD industry, the company's scale and vertically integrated model, and continued growth of digital rich media by consumers and enterprise storage requirements bode favorable for longer-term HDD unit demand, the agency said.
Seagate's debt-to-operating EBITDA ratio could rise to 5x or greater in fiscal 2009 compared with 1.4x as of Dec. 31, the agency said.
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