S&P moves MaxLinear to negative watch

S&P said it placed its BB ratings on MaxLinear Inc. and its first-lien term loan on CreditWatch with negative implications.

The placement follows MaxLinear reporting it agreed to buy Silicon Motion Technology Corp. at an equity value of about $3.8 billion based on MaxLinear's pre-announcement share price. A bank commitment for $3.25 billion to fund the deal, expected to close in the first half of 2023, is in place. Pro forma leverage is expected to be in the mid-4x area.

“MaxLinear intends to rapidly deleverage supported by a total $100 million of cost synergies fully achieved within 18 months after the close and the use of free operating cash flows (FOCF) to prepay debt. While we currently expect leverage to decrease to at least the mid-3x area within 12 months after the close, this is still above levels we consider in line with the current BB rating,” S&P said in a press release.

The agency said it aims to resolve the CreditWatch either when it can review more detailed information regarding the terms of the final capital structure and integration plan or at transaction close.

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