S&P cuts Smart, rates loan B+

Standard & Poor's said it lowered the corporate credit rating on Smart Modular Technologies (WWH) Inc. to B+ from BB-.

The downgrade follows news that the company has agreed to be acquired by a group of private investors for about $645 million in cash.

As a result of the going-private transaction, leverage will increase to the 3x area from less than 1x and could approach 4x over the near term due to DRAM market conditions, S&P said.

The ratings also were removed the ratings from CreditWatch with negative implications, where they were placed in April.

The outlook is stable.

S&P also said it assigned a preliminary issue-level rating of B+ with a preliminary recovery rating of 4 to Smart's proposed $300 million senior secured term loan due 2018. The 4 recovery rating indicates 30% to 50% expected recovery in a default.

The agency said it will not rate the $50 million first-out revolver due 2016.

S&P said it expects the company's trailing 12-month revenues and margins to decline moderately over at least the next two quarters, primarily reflecting the negative effect of DRAM price volatility.

As a result, leverage may rise to the 4x range from current post-transaction pro forma leverage of about 3x, the agency said.

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