Bangkok--7 Jan--Moody's Investors Service
Moody's Investors Service says that the announcement by Global A&T Electronics Ltd (GATE) that it will acquire all the outstanding shares of ASAT Limited will not have any immediate impact on GATE's B1 ratings or on its negative outlook.
"GATE will pay an equity value of US$40-45 million for the acquisition, which is manageable, given GATE's ample cash-on-hand amount of US$360 million as of September 30, 2009," says Ken Chan, a Moody's Vice President. "As part of the transaction, GATE will only assume a net debt of around US$15 million, representing only 1% of its total debt outstanding."
"The acquisition makes strategic sense as it will strengthen GATE's presence in China and allow it to capture the country's growing semiconductor market. The revenue expected to be brought in by ASAT Limited represents around 15% of GATE's pro-forma consolidated revenue," says Chan.
The negative outlook continues to reflect the fact that the company's financial leverage remains weak for its rating, with total adjusted Debt/EBITDA of around 5.8-6.0x in 2009. However, the ratio should gradually improve along with the industry's recovery.
Moody's will monitor GATE's ability to ramp up its operating cash flow, the integration process and its China expansion strategy. Any deviation from our expectation of an improving leverage ratio could pressure its ratings.
The last rating action with respect to GATE was taken on August 21, 2008, when its ratings outlook was changed to negative from stable.
The principal methodology used in rating GATE is the Global Semiconductor Industry Methodology. This can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
Global A&T Electronics Ltd (GATE) is the holding company of United Test and Assembly Center Ltd (UTAC), a provider of semiconductor assembly and test services with manufacturing facilities in Singapore, Taiwan, Thailand and China. UTAC was privatized through a leverage buy-out by a private equity group led by TPG Capital and Affinity Equity Partners in October 2007.
Hong Kong
Ken Chan
Vice President - Senior Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
Singapore
Tony Tsai
Senior Vice President
Corporate Finance Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308