TEXT - S&P rates NXP B.V. proposed senior secured term loan
(The following statement was released by the rating agency) Dec 4 - Standard & Poor's Ratings Services said today that it assigned its 'B+' issue rating to the proposed $500 million senior secured term loan due 2020, to be issued by Dutch semiconductor manufacturer NXP B.V. (B+/Stable/--) and its wholly owned subsidiary NXP Funding LLC (together, NXP). The issue rating is in line with the corporate credit rating on NXP B.V. At the same time, we assigned a recovery rating of '4' to the proposed loan, indicating our expectation of average (30%-50%) recovery prospects in the event of a payment default. In addition, we affirmed our 'B+' issue rating on NXP's existing senior secured notes (denominated in U.S. dollars and euros) and senior secured term loans. The recovery rating on these notes and loans remains unchanged at '4', indicating our expectation of average (30%-50%) recovery in the event of a payment default. Finally, we affirmed our 'BB' issue rating on NXP's EUR620 million super senior revolving credit facility (RCF) due March 2017. (NXP recently increased this RCF by EUR120 million.) The recovery rating on the RCF remains unchanged at '1', reflecting our expectation of very high (90%-100%) recovery for debtholders in the event of a payment default. We understand that NXP will use the proceeds of the proposed loan to fund a $500 million tender offer that it has announced for its 9.75% senior secured notes due 2018. RECOVERY ANALYSIS Our recovery rating on the proposed senior secured loan is supported by our valuation of NXP as a going concern and by the fairly comprehensive security package provided to the senior secured lenders. The difference between the issue rating on the senior secured debt instruments and that on the RCF reflects the super senior status of the RCF, with RCF lenders ranking ahead of the secured noteholders and other lenders in the event of default. Under our hypothetical scenario, we envisage, among other things, declining revenues as a result of a significant macroeconomic and industry slowdown; increasing competitive pressure; a significant drop in operating margins; and meaningful capital expenditure and research and development commitments. At our hypothetical point of default in 2016, we calculate that EBITDA would decline to about $430 million. We estimate the stressed enterprise value of the group at the point of hypothetical default to be approximately $2.6 billion, which is equivalent to 6.0x stressed EBITDA. After taking these factors into account and deducting the costs of enforcement and other priority liabilities of about $290 million, we arrive at a net enterprise value of about $2.3 billion. Our valuation assumes a proportionate consolidation of NXP's 61% subsidiary, Systems on Silicon Manufacturing Co. Pte. Ltd. (SSMC). However, we believe there could be additional upside to our valuation of SSMC at the point of default. We envisage about $830 million of super priority debt (including the fully drawn RCF and six months of prepetition interest). This equates to very high (90%-100%) recovery prospects for the RCF lenders, and translates into a recovery rating of '1' on this instrument. With about $3.1 billion outstanding at default for the senior secured debtholders, we see recovery prospects within the 30%-50% range. This translates into a recovery rating of '4' on the various senior secured debt instruments, including the proposed loan. RELATED CRITERIA AND RESEARCH All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated. -- Criteria Guidelines For Recovery Ratings On Global Industrials Issuers' Speculative-Grade Debt, Aug. 10, 2009 RATINGS LIST New Rating NXP B.V. NXP Funding LLC Senior Secured Debt B+ Recovery Rating 4 Ratings Affirmed NXP B.V. NXP Funding LLC Senior Secured Debt B+ Recovery Rating 4 Senior Secured Debt BB Recovery Rating 1 (Caryn Trokie, New York Ratings Unit)
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