Moody's downgrades Seagate

Moody's Investors Service said it lowered Seagate HDD Cayman's corporate family rating, the ratings for its senior unsecured notes to Ba2, from Ba1 and its speculative grade liquidity rating to SGL-2, from SGL-1. Seagate HDD Cayman is an indirect subsidiary of Seagate Technology Holdings plc.

“The downgrade of the CFR to Ba2 reflects Seagate's aggressive shareholder capital returns that have left the company with significantly reduced financial flexibility to weather a steep cyclical downturn underway. The company's cash balances have steadily declined and debt has increased since the end of fiscal year 2019 as a result of its dividends and share repurchases,” the agency said in a press release.

Moody's said it estimates Seagate's adjusted operating income will plunge 60% to 70% in FY 2023, driven by revenue declines and an erosion in operating margins. The agency forecasts Seagate's total debt to EBITDA to approach or exceed 5x (Moody's adjusted) by the end of FY 2023, and negative free cash flow (after dividends) in FY 2023.

The outlook is stable.

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