Moody’s drops Smart Modular to Caa1, loans to Caa1, B3

Moody's Investors Service said it downgraded Smart Modular Technologies (Global), Inc.'s ratings, including the corporate family rating to Caa1 from B2, probability of default rating to Caa1-PD from B2-PD, senior secured term loan to Caa1 from B2 and senior secured revolver to B3 from B1 due to both weakening end market demand in Brazil, which has caused Smart's earnings to decline substantially, and the approaching term loan maturity.

The outlook is stable.

Moody’s said the actions were based on its expectation that the Brazilian computer market will contract further over the next year and its belief that end market conditions in Brazil will remain weak, making it difficult for Smart to refinance or extend the maturity of the term loan, which matures in August 2017.

"Moody's expects breakeven to negative free cash flow and declining liquidity near term as we believe revenues and EBITDA will remain well below historical performance and our prior expectations. This reflects a more rapid than anticipated decline in revenues due to the contraction of the Brazilian economy and the rapid decline in computer sales in Brazil," Moody’s senior analyst Terry Dennehy said in a news release.

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