TEXT - S&P may raise Sensata Technologies B.V. rating

Wed Dec 12, 2012 3:54pm EST

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Overview
     -- Netherlands-based manufacturer Sensata Technologies Holding N.V. has 
announced that its majority shareholder, Bain Investment Co. S.C.A., is 
selling shares that will reduce its ownership to about 45% from about 50%.
     -- We believe Bain's continued exit reduces risks related to Sensata 
pursuing a more aggressive financial policy.
     -- We are placing our ratings on Sensata on CreditWatch with positive 
implications.
     -- We expect to raise the ratings one notch upon closing of the 
transaction.

Rating Action
On Dec. 12, 2012, Standard & Poor's Ratings Services placed its ratings on 
Sensata Technologies B.V., including the 'BB-' corporate credit rating, on 
CreditWatch with positive implications.

Rationale
The CreditWatch placement follows the announcement that majority owner of 
publicly traded Sensata Technologies Holding NV (the ultimate parent of rated 
Sensata Technologies B.V.), Bain Capital, will participate in a share offering 
that will reduce its stake in Sensata to less than 50%. We believe the 
offering provides further evidence of the lessening influence of Bain on the 
company's financial policy and expect a one-notch upgrade for Sensata if the 
transaction is completed. The ratings on electronic sensors and controls 
manufacturer Sensata reflect the company's "aggressive" financial risk profile 
and "satisfactory" business risk profile. Standard & Poor's believes credit 
measures will remain consistent with a one-notch higher rating, including 
funds from operations (FFO) to adjusted debt of about 20% and adjusted debt to 
EBITDA of about 3.5x. In 2013, we expect Sensata's adjusted EBITDA margin to 
remain very good at about 29% and revenue to increase, benefiting from:
     -- A continued slow global economic recovery, 
     -- Global light-vehicle production growth despite potentially weak 
conditions in Europe, and
     -- The potential to supplement growth through some acquisition activity. 

The Netherlands-based Sensata, formerly a division of Texas Instruments Inc., 
consists of two business units that manufacture highly engineered electronic 
sensors and controls. Our assessment of the company's management and 
governance is "fair." We expect revenue to approach $2 billion in 2012. The 
company is significantly exposed to the volatility of the global automotive 
market, which accounts for more than half of sales. The European auto market 
is Sensata's largest single exposure, accounting for 25% of 2011 sales, and we 
believe the region presents heightened near-term economic risks. 

However, we expect Sensata to maintain its No. 1 market share in most of its 
products--it is the sole or primary source for most of its customers. Demand 
for its products is increasing at a faster rate than vehicle growth, as sensor 
content per vehicle rises. We do not believe growth prospects are as favorable 
in the controls portion of the business, but this segment does provide 
diversification benefits to the credit profile. The company's global 
manufacturing footprint helps it maintain its low-cost production and leading 
positions. Sensata has good geographic diversification: In 2011, about 65% 
sales were outside of the U.S. We expect its operating margin to remain solid.

Liquidity
Liquidity is "adequate" in our assessment. We take into account the following 
expectations and assumptions:

     -- Sensata's ratio of liquidity sources, including cash and facility 
availability, to uses is likely to exceed 1.2x for the next 12 months;
     -- We expect net sources to remain positive and for the company to have 
sufficient headroom even if EBITDA declined by 15%; and
     -- We believe the company has sound relationships and satisfactory 
standing in credit markets.

Near-term maturities are minimal. In May 2011, the company refinanced its 
debt. The company has ample availability under a $250 million revolver that 
expires in 2016 and a $1.1 billion term loan due in 2018. The company also has 
$700 million of senior unsecured notes due 2019. Headroom under a springing 
covenant, setting a maximum 5x senior secured net leverage ratio when the 
revolver is drawn by 10% or more, is likely to remain substantial.

CreditWatch
The ratings are on CreditWatch with positive implications. If the 10 million 
share offering is completed, Bain will own less than 50% of outstanding 
shares, although it will remain the company's largest shareholder. We believe 
the continuing exit by Bain reduces the chance that financial policy will 
become more aggressive, and we believe credit measures will remain at 
appropriate levels for a one-notch higher rating. We expect to raise the 
rating following the completion of the offering. Further upgrades are unlikely 
until Bain has significantly further reduced its investment in Sensata and 
would depend on our assessment that the company would maintain appropriate 
credit measures for a higher rating. We could affirm the ratings if the 
offering is not completed.

Related Criteria And Research
     -- General Criteria: Methodology: Management And Governance Credit 
Factors For Corporate Entities And Insurers, Nov. 13, 2012
     -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 
2012
     -- Methodology And Assumptions: Liquidity Descriptors For Global 
Corporate Issuers, Sept. 28, 2011
     -- Credit FAQ: Knowing The Investors In A Company's Debt And Equity, 
April 4, 2006

Ratings List
Ratings Placed on CreditWatch
                                        To                 From
Sensata Technologies B.V.
 Corporate Credit Rating                BB-/Watch Pos/--   BB-/Stable/--
 Senior Secured                         BB+/Watch Pos      BB+
   Recovery Rating                      1                  1
 Senior Unsecured                       B/Watch Pos        B
  Recovery Rating                       6                  6
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