Fitch Affirms Flextronics' IDR at 'BB+'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed the following ratings for Flextronics International
Ltd. (Flextronics):

--Issuer Default Rating (IDR) at 'BB+';

--Senior unsecured credit facility at 'BB+';

--Senior subordinated notes at 'BB-'.

The Rating Outlook is Stable.

The affirmations and Stable Outlook reflect the following considerations:

--Fitch expects Flextronics' EBITDA margins, which declined to 2.7% in the March
2009 quarter from 4.4% in the prior year period, to improve modestly over the
next 12 to 24 months as the company reduces fixed expense commensurate with the
current revenue run rate and potentially begins to absorb excess manufacturing
capacity from modestly improving revenue;

--Fitch expects Flextronics to continue to manage its cash conservatively over
the next 12 months with uses of free cash flow limited primarily to internal
investment and debt reduction with a lower emphasis on acquisitions which could
negatively impact the company's currently very solid liquidity position.
Flextronics has $435 million in debt maturities over the next 18 months which
Fitch expects to be redeemed from existing cash balances;

--Fitch expects Flextronics to produce strong free cash flow, even in the
current environment as the company benefits from minimal working capital
requirements and reduced capital spending plans. Fitch estimates that
Flextronics has produced average annual free cash flow of nearly $500 million
each of the past three years; and

--Fitch estimates leverage (total debt / total operating EBITDA) to be 3.1 times
(x) currently (approximately 4.1x when adjusted for off-balance sheet receivable
financing and operating leases) and expects leverage to decline modestly in
fiscal 2010 (end March 2010) as Flextronics reduces its total debt outstanding.
Interest coverage has declined to 4.3x from 6.4x in the prior year period.

Rating strengths include:

--Significant advantage in scale and scope of operations as the second largest
provider of electronics manufacturing services in the world;

--Strong track record of execution as evidenced by peer leading return on
invested capital (ROIC) and cash conversion cycle (CCC) days;

--Blue chip customer base with strong exposure to faster growing market
segments, particularly in the consumer space; and

--High working capital provides an additional source of liquidity in a market
downturn.

Ratings concerns include the following:

--Flextronics has an aggressive acquisition growth strategy in an industry with
significant execution risk with minimal room for execution missteps due to the
relatively low profit margin inherent in the business model;

--A difficult competitive environment which has pressured profitability across
the industry; and

--Flextronics has customer concentration risk, although at the low-end of the
range typical for the electronic manufacturing services industry, with its top
10 customers accounting for approximately 50% of revenue in fiscal 2009 (ending
March 2009).

Positive rating actions could occur based on improved and sustained EBITDA
margins combined with expected reductions in total debt outstanding. Conversely,
the ratings could be negatively affected if profitability and revenue run rates
continue to be negatively influenced by the economic downturn or if working
capital management deteriorates and negatively impacts liquidity.

Liquidity as of March 31, 2009 was solid with $1.8 billion in cash and a fully
available $2 billion senior unsecured revolving credit facility which expires in
May 2012. Additionally, Fitch expects Flextronics to produce strong free cash
flow, even in the current environment with minimal working capital requirements
and reduced capital spending plans. Fitch estimates that Flextronics has
produced average annual free cash flow of nearly $500 million each of the past
three years. Flextronics utilizes an accounts receivable securitization facility
as well as accounts receivable sales agreements for additional liquidity
purposes.

Total debt as of March 31, 2009 was $3 billion and consisted primarily of $195
million in 0% junior convertible subordinated notes due July 2009 which Fitch
expects to be redeemed from existing cash; $1.7 billion outstanding under a
senior unsecured term loan facility, of which approximately $500 million is due
in October 2012 with the remainder due in October 2014; $240 million in 1%
convertible subordinated notes due August 2010; $400 million in 6.5% senior
subordinated notes due May 2013; and $400 million in 6.25% senior subordinated
notes due November 2014. Flextronics also has approximately $200 million
outstanding under its accounts receivable securitization facility and $350
million outstanding under various accounts receivable sales agreements.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Jason Paraschac, +1-212-908-0746
Nick P. Nilarp, CFA, +1-212-908-0649
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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