Fitch rates Avnet loan BB, ups view to positive

Fitch Ratings said it revised the outlook on Avnet Inc. to positive from stable and affirmed the company's senior unsecured notes at BB. Fitch also assigned a BB rating to the company's senior unsecured bank credit facility.

The positive outlook also considers Avnet's recent refinancing of $250 million of 8% senior notes due Nov. 15, 2006, which the company will fund primarily with net proceeds from its $250 million issuance of 6% senior notes due 2015.

Fitch said the ratings continue to consider Avnet's exposure to the cyclical demand patterns and volatile cash flows associated with the semiconductor market (55%-60% of sales); the significant investment levels required of Avnet to increase market share in the faster growing Asia-Pacific region; Avnet's propensity for acquisitions; and Fitch's belief that operating margins for the components distributors will remain thin and be challenged to meaningfully increase, despite efforts to expand into higher margin services.

The ratings are supported, the agency said, by the company's leading positions in each of the aforementioned markets; meaningfully improved working capital management, as well as a demonstrated ability to generate significant cash flow from working capital during a downturn; a well diversified supplier and small- to medium-size customer base; and continued growth of the more stable technology solutions segment.

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