Fitch affirms AU Optronics

Fitch Ratings said it removed from Rating Watch negative and affirmed Taiwan-based AU Optronics Corp.'s long-term foreign- and local-currency issuer default ratings at BB and national long-term rating at BBB+(twn).

The outlook is stable.

The ratings were placed on negative watch following an announcement that the company would acquire Quanta Display Inc. through a share swap.

Although net debt has increased for the company after the transaction, Fitch said, the higher leverage is still within the scope of the assigned ratings and is offset by the improved business risk profile.

Fitch said the increase in leverage also is in line with the trend among the thin-film-transistor liquid crystal display manufacturers in Asia at the current phase of the industry cycle. Nevertheless, Fitch added, the ratings will likely be downgraded should AU Optronics fail to restrict its net debt at below 3.0x of annual operating EBITDA.

The company's net debt-to-EBITDA ratio was 2.7x at the close of the transaction on Oct. 1.

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