TEXT - S&P rates NXP B.V. proposed senior secured term loan

Tue Dec 4, 2012 10:11am EST

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(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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