Moody's rates Solectron notes B3

Moody's Investors Service said it assigned a B3 rating to Solectron Corp.'s proposed $150 million ten-year senior subordinated notes. The outlook is stable.

The agency also affirmed Solectron's Ba3 $500 million guaranteed senior secured revolving credit facility due 2007, B1 corporate family rating, B1 $450 million 0.5% convertible senior notes due 2034, B1 $150 million 7 3/8% senior notes due 2006, B3 $64.3 million 7.97% subordinated debentures due 2006 and SGL-1 speculative grade liquidity rating.

The notes are being issued by Solectron's subsidiary Solectron Global Finance Ltd. and will be fully and unconditionally guaranteed by Solectron. Proceeds will be used to repay Solectron's $150 million 7 3/8% senior notes due 2006.

Moody's said the weak business fundamentals of Solectron continue to outweigh the benefits of its liquid balance sheet. The ratings reflect Solectron's historical lack of profitability, the intense competitive landscape within the electronics manufacturing services sector, the "lumpiness" of the sector's key customers and continued sub-par financial performance in terms of profitability and return measures.

The ratings are supported by Solectron's franchise value and its importance as a tier-one electronics manufacturing services provider in the global electronics supply chain, a liquid balance sheet with the company in a $1.3 billion net cash position and an unencumbered balance sheet (assuming its revolver remains undrawn), the agency said.

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