S&P applies BBB- to Seagate notes

Standard & Poor's said it assigned its BBB- issue-level rating to Seagate Technology plc’s announced $500 million senior note issuance due 2026, to be issued by its subsidiary Seagate HDD Cayman.

The agency expects that Seagate will apply net proceeds from the transaction for general corporate purposes, including the repayment of debt. On April 7, Seagate announced that it intends to redeem all of its remaining about $474 million outstanding 6 7/8% senior notes due 2020 and it anticipates that these notes will be redeemed on May 7 at their call premium redemption price plus accrued and unpaid interest.

S&P estimates that this transaction will be neutral to adjusted net leverage, which we expect to remain below 1 time over the coming 12 months. The agency will withdraw the ratings on the existing 6 7/8% senior notes once the tender closes.

S&P said the ratings reflect Seagate "fair" business risk profile, incorporating the company's leadership position in the hard disk drive (HDD) market, offset somewhat by exposure to solid state drive (SSD) substitution. The ratings also reflect the company's "minimal" financial risk profile, characterized by leverage of about 1 time, including adjustments for operating leases and surplus cash, and "strong" liquidity, the agency said.

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