Moody's ups Solectron to SGL-1

Moody's Investors Service said it upgraded Solectron Corp.'s speculative grade liquidity rating to SGL-1 from SGL-2.

Moody's said the change is based on Moody's belief that the company's unrestricted internal cash sources, totaling about $1.2 billion as of May 30 pro forma for recent debt refinancing activity (3.25% LYONs issue; ACES), provide very good liquidity to support anticipated operational needs during the next 12 months. With the refinancing of the 3.25% LYONs issue (May 2004 noteholders' put) and ACES (required significant annual interest payments), the company is no longer confronted with material debt servicing requirements during the next 12 months.

While the company continues to struggle with the generation of meaningfully positive operating and free cash flow, this substantial on-hand liquidity combined with the company's access to a committed, unused $250 million revolver provide reasonable grounds for the recommended liquidity rating upgrade, the agency added.

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