S&P may change Conexant Systems <CNXT.O> ratings
NEW YORK, Sept 18 - Standard & Poor's today placed its double-'B'-minus corporate credit and bank loan ratings and single-'B' subordinated debt rating of Conexant Systems Inc. on CreditWatch with developing implications.
The CreditWatch placement follows Newport Beach, Calif.-based Conexant's announcement that it intends to separate itself into two companies. Balance sheet structures and other financial characteristics of the two companies have not yet been determined.
Conexant's current Network Access Division, with revenues of about $550 million for the fiscal year ending September 30, 2000, will be spun off as a stand-alone Internet infrastructure company. The division will be a fabless semiconductor company serving data communications infrastructure equipment makers.
The division's sales have doubled in each of the past two years, while gross margins are about 65%. Conexant has made six acquisitions in the unit thus far in 2000. Conexant intends to file an IPO of the division in January 2001, followed by a tax-free distribution of the balance of the company to shareholders during the subsequent six months.
The second company, with sales of about $1.5 billion, will focus on chips for wireless handset, personal computer, and game console makers. The business has about 50% of the market for key modem semiconductors, a strong position in the Internet service-provider central-site modem business, and good positions in portions of the wireless handset marketplace. Gross margins are in the low 40% area. Conexant's manufacturing assets will remain with this company.
Although the Network Access Division is in a sector currently valued highly by the equity markets, proceeds of the IPO cannot yet be assessed, nor has Conexant determined the distribution of assets, liquidity, debt, and cash flows of the two companies.
The consolidated company's debt level of $1 billion is about 1.6 times annualized EBITDA, based on the nine months ended June 30, 2000, and cash balances of $863 million at June 30, 2000, Standard & Poor's said.
Should either successor's financial profile be materially stronger than the current company's, its ratings could be higher. However, weaker capitalization, smaller cash flows, or a riskier business profile of a successor could lead to lower ratings.
14:32 09-18-00 |
