Moody's ups Solectron to SGL-2

Moody's Investors Service said it upgraded Solectron Corp.'s speculative grade liquidity rating to SGL-2 from SGL-3.

This rating is based on Moody's belief that the company's internal cash sources, particularly its $1.37 billion cash balance as of Nov. 28, 2003, further supported by net proceeds from its recent $450 million convertible note offering and anticipated sales of each of Dy 4 Systems ($110 million proceeds, closed late January) and Smart Modular Technologies ($100 million proceeds, announced mid-February and expected to close in near-term), provide a good liquidity cushion to finance operations during the next 12 months.

These funds provide more than sufficient capital to address the company's near-term debt servicing requirements, headlined by the scheduled May 2004 put option totaling $953 million (accreted value of $939 million as of Nov. 28, 2003) on the existing 3¼% LYONs due 2020.

Moody's also said the liquidity rating incorporates uncertainty surrounding the company's ability to generate positive free cash flow over the next four quarters as well as remain in compliance with the financial covenants associated with its $250 million senior secured revolving credit facility maturity Feb. 14, 2005.

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