Having a credit facility wacked from 175 to 45 is not going to help SPSN. From a prior post in mid December, Fitch wacked SPSNs rating, with the big concern being their access to liquidity. Looks like that tumbled again.
Total debt as of Sept. 30, 2008 was approximately $1.6 billion and consisted primarily of: i) approximately $272 million outstanding under Spansion Japan's, a wholly-owned subsidiary of Spansion Inc., senior secured credit facility expiring Dec. 16, 2010; ii) approximately $55 million outstanding under Spansion Inc.'s $175 million senior secured RCF expiring Sept. 19, 2010, the availability of which has been reduced by a combination of a lower borrowing base and $35 million due to EBITDA levels falling below prescribed minimum levels; iii) approximately $75 million outstanding under Spansion Japan's senior secured RCF expiring Dec. 28, 2009; iv) approximately $625 million of floating rate senior secured notes due 2013; v) approximately $225 million of 11.25% senior unsecured notes due 2016; vi) $207 million of 2.25% exchangeable senior subordinated debentures due 2016; and vii) approximately $80 million of other debt, including capital leases.
The Recovery Ratings (RR) and notching reflect Fitch's expectation that Spansion's enterprise value, and hence recovery rates for its creditors, will be maximized as a going concern rather than as in liquidation under a distressed scenario, although the difference between the two continues to shrink. Fitch's analysis assumes Spansion ability to draw against its bank credit facilities will remain constrained by covenants, reducing availability under its U.S. RCF by $35 million due to EBITDA falling below prescribed levels, as well as the current borrowing base. Fitch has reduced the discount to operating EBITDA (in estimating distressed operating EBITDA)to 0% from 25% due to Fitch's expectations that Spansion's profitability will decline meaningfully in the fourth quarter, resulting in an already distressed operating EBITDA amount of approximately $210 million for the full fiscal year of 2008.
Fitch believes $800 million of rated senior secured debt, including $625 million of senior secured floating rate notes and a fully drawn $175 million U.S. revolving bank credit facility, will recover 51%-70% in a reorganization scenario, resulting in a 'RR3' recovery rating. A waterfall analysis provides 0% recovery for the approximately $225 million of rated senior unsecured debt and $207 million of senior subordinated notes, both resulting in a recovery rating of 'RR6'. |
