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Technology Stocks : Amkor Technology Inc (AMKR) -- Ignore unavailable to you. Want to Upgrade?

To: tech101 who wrote (175)	4/26/1999 3:31:00 PM
From: tech101	Read Replies (1) \| Respond to of 1056

Comments & Comparison with Industry ? Monday April 26, 2:40 pm Eastern Time S&P assigns ratings to Amkor Technology (Press release provided by Standard & Poor's) NEW YORK, April 26 - Standard & Poor's today assigned its ratings to Amkor Technology Inc. (See list below). The double-'B'-minus corporate credit rating on Amkor Technology recognizes the company's good business position and strong cash flows, offset by substantial price pressures, its relatively high debt leverage, the evolving nature of its served industry, and its ongoing relationship with Anam Semiconductor Inc. of Korea. West Chester, Pa.-based Amkor is the largest independent supplier of semiconductor packaging services, performed in its own factories as well as factories owned by Anam. Semiconductor wafers are taken on consignment after fabrication by major chip manufacturers, separated, and encapsulated in a plastic package with contacts for external circuitry. While the chip assembly outsourcing industry is expected to grow, semiconductor still retain almost 80% of total industry packaging capability in-house, potentially impacting assemblers' revenues and margins in a sector recession. Amkor will use proceeds of two note issues to purchase an assembly plant from financially stressed Anam. Amkor has also committed to a $150 million equity investment in Anam over the next four years, at which point it will own about 43% of Anam's stock, and continue to rely on Anam for a portion of its packaging commitments to its major semiconductor customers. The transaction reduces Amkor's reliance on Anam's packaging services. Amkor will continue to market Anam's semiconductor manufacturing services to Texas Instruments Inc. and other potential customers. Amkor's profitability has improved somewhat over the last few years, with earnings before interest, taxes, depreciation, and amortization (EBITDA) margins of about 17% in 1998 compared to 13% in 1997 and 11% in previous years. The improvement reflects higher utilization levels, devaluation of the Korean won relative to the dollar, and the shift of Amkor's sales to its own factory output, from distributing products manufactured by Anam. Price pressures have been severe in recent years, while the company remains exposed to fluctuations in the Philippine peso and Korean won. Profitability levels could also vary materially depending on the relative mix of each package type manufactured in coming years and on the utilization levels of its factories. Amkor's selling margin on semiconductors manufactured in Anam's wafer factory are negotiated between the companies, and will be 10% in 1999 versus 15% in 1998. Pro forma for the new issues, EBITDA interest coverage was 3.8x in 1998, while debt is relatively high at about 3.3x EBITDA. The company had $218 million cash at March 31, 1999. Due to low capital intensity and industry practice to consign high-priced semiconductor wafers, the company has generated good free cash flows, $139 million in 1998. However, cash flows are likely to be lower this year as Amkor is responsible for capital expenditures of the acquired plant and begins to make committed equity investments in Anam. OUTLOOK: STABLE Ratings anticipate that industry recovery will permit the company to fully benefit from the additional capacity. Ratings also anticipate that Amkor will not extend financial support to Anam significantly beyond levels currently contemplated. The company's good industry position and expected financial flexibility provide good downside protection, Standard & Poor's said. RATINGS ASSIGNED Rating Corporate credit rating BB- $207 million 5.75% convertible subordinated notes due 2003 (issued 1998) (Rule 144A with registration rights) B $200 million senior notes 2006 BB- (Rule 144A with registration rights) $400 million 144A senior subordinated notes due 2009 (Rule 144A with registration rights) B