Welcome!

News Feed Item

Fitch Rates Tyco Electronics $1 Billion Senior Notes Offering 'A-'

Fitch Ratings assigns an 'A-' rating to Tyco Electronics Group S.A.'s (TEGSA) $1 billion senior notes issuance. TEGSA, a wholly owned subsidiary of TE Connectivity Ltd. (NYSE: TEL, TE Connectivity), issued:

--$500 million of floating rate senior notes due 2016;

--$250 million of 2.35% senior notes due 2019;

--$250 million of 3.45% senior notes due 2024.

A complete list of ratings is provided at the end of this release.

TEGSA will use net proceeds for general corporate purposes, including funding a portion of the $1.7 billion Measurement Specialties acquisition (which includes assumed debt) expected to close in the latter part of calendar 2014, pending customary regulatory approvals. The senior notes will be fully and unconditionally guaranteed on a senior unsecured basis by TE Connectivity.

Measurement Specialties is a provider of sensors and sensors solutions with significant capabilities in harsh environments, including automotive end markets. For fiscal 2015, Measurement Specialties' sales are expected to be more than $500 million with EBITDA margin in the high-teens.

The acquisition transforms TE Connectivity's relatively small sensors business into a leader within a large, fragmented and high-growth sensors market. In addition, TE Connectivity's scale and global reach should accelerate growth across verticals and applications.

Pro forma for the senior notes issuance, Fitch estimates total debt to operating EBITDA (leverage) was 1.5 times (x) for the latest 12 months (LTM) ended June 27, 2014. Fitch expects TE Connectivity will use free cash flow (FCF) for debt reduction to drive leverage toward 1x over the intermediate term and maintain leverage of 1x-2x through the business cycle over the long term.

The ratings and Stable Outlook continue to reflect Fitch's expectations for strong profitability and annual FCF through the business cycle, continued top line benefits from diversified sales portfolio and conservative financial policies.

Fitch expects the company's end market and geographic diversification will drive solid top line growth over the longer term, albeit within a cyclical context. For fiscal 2014, Fitch expects solid global automotive production, strong commercial aerospace orders and recovering industrial equipment markets to offset declines in personal computing, slow mid- and down-stream energy and weak datacomm markets to drive mid-single digit revenue growth.

Fitch has increased confidence in TE Connectivity's ability to offset average annual price erosion with new product introductions (NPI) and productivity gains, resulting in expectations for mid-cycle operating EBIT margin in the high-teens. TE Connectivity's consistent research and development investments drive more than a quarter of annual revenues from NPI, while ongoing efficiency programs and footprint optimization provide a sustainable cost reduction roadmap.

Fitch expects annual FCF will range from $750 million to $1.25 billion through the cycle, with mid-cycle FCF in excess of $1 billion. In a downturn, TE Connectivity offsets lower profitability with cash generated from the liquidation of short-cycle inventory, as the company did in fiscal 2009. Fitch expects FCF will be used to fund share repurchases and smaller acquisitions. The company ended the March 2014 quarter with $1 billion available for repurchase under the current stock buyback programs.

Other uses of cash include cash pension obligations, which should be minimal over the next few years, and potential cash payments related to the company's pre-separation tax sharing agreement with Tyco International and Covidien. Fitch expects obligations will be manageable at the current rating and a longer-term event.

KEY RATING DRIVERS

The ratings and Outlook reflect TE Connectivity's:

--Diversified geographic, end-market and customer portfolios, industry-leading positions in large and relatively fragmented markets; and substantial scale and scope, which should result in longer-term share gains in faster-growing developing markets;

--Consistent annual FCF of $750 million to $1.25 billion; and

--Conservative financial policies, including solid liquidity and commitment to managing debt levels to maintain total leverage target at or below 2x;

Fitch's rating concerns center on:

--The company's need to mitigate average selling price (ASP) pressures in the majority of its end-markets with efficiency initiatives and new product introductions, as well as vulnerability of gross profit margin over the short-term to commodity price volatility;

--The cyclical demand patterns associated with electronics components;

--The company's use of cash for share repurchases and acquisitions, given mature organic revenue growth prospects across certain key end-markets.

RATING SENSITIVITIES

Fitch believes further positive rating action is unlikely in the absence of expectations for structurally higher mid-cycle FCF or a commitment to more conservative financial policies.

Conversely, Fitch may take negative rating actions if:

--Expectations for operating profit margins to remain below the 10% - 15% range over the longer term, likely due to a diminished ability to offset pricing pressures with new product introductions and productivity gains; or

--Lower than anticipated annual FCF.

Pro forma for the senior notes issuance, TE Connectivity's liquidity at June 27, 2014 was solid and supported by:

--Approximately $2.6 billion of cash and cash equivalents;

--An undrawn $1.5 billion, five-year revolving credit facility expiring August 2018. This credit facility backs up the company's up to $1.25 billion commercial paper (CP) program.

Availability under the revolving credit facility expiring currently is reduced by $375 million of borrowings under the CP program.

--An undrawn $1 billion bridge credit facility.

Fitch's expectations for strong annual FCF also support liquidity.

Pro forma for the senior notes issuance, total debt at June 27, 2014 was $4 billion and consisted of:

--$250 million of 1.6% senior notes due 2015;

--$500 million of floating rate senior notes due 2016;

--$724 million of 6.55% senior notes due Oct. 1, 2017;

--$323 million of 2.375% senior notes due Dec. 17, 2018;

--$250 million of senior notes due 2019;

--$263 million of 4.875% senior notes due Jan. 15, 2021;

--$501 million of 3.5% new senior notes due 2022;

--$250 million of senior notes due 2024;

--$475 million of 7.125% senior notes due Oct. 1, 2037;

--$89 million of 3.5% convertible subordinated notes due 2015 (legacy ADC Telecommunications notes); and

--$375 million of borrowings under the company's CP program.

Fitch currently rates TE Connectivity and TEGSA as follows:

TE Connectivity:

--Long-term IDR 'A-';

--Short-term IDR 'F2'.

TEGSA:

--Long-term IDR 'A-';

--Short-term IDR 'F2';

--CP program 'F2';

--Senior unsecured revolving credit facility (RCF) 'A-';

--Senior unsecured notes 'A-'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=842100

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
The current age of digital transformation means that IT organizations must adapt their toolset to cover all digital experiences, beyond just the end users’. Today’s businesses can no longer focus solely on the digital interactions they manage with employees or customers; they must now contend with non-traditional factors. Whether it's the power of brand to make or break a company, the need to monitor across all locations 24/7, or the ability to proactively resolve issues, companies must adapt to...
In his session at 20th Cloud Expo, Scott Davis, CTO of Embotics, discussed how automation can provide the dynamic management required to cost-effectively deliver microservices and container solutions at scale. He also discussed how flexible automation is the key to effectively bridging and seamlessly coordinating both IT and developer needs for component orchestration across disparate clouds – an increasingly important requirement at today’s multi-cloud enterprise.
Modern software design has fundamentally changed how we manage applications, causing many to turn to containers as the new virtual machine for resource management. As container adoption grows beyond stateless applications to stateful workloads, the need for persistent storage is foundational - something customers routinely cite as a top pain point. In his session at @DevOpsSummit at 21st Cloud Expo, Bill Borsari, Head of Systems Engineering at Datera, explored how organizations can reap the bene...
We are seeing a major migration of enterprises applications to the cloud. As cloud and business use of real time applications accelerate, legacy networks are no longer able to architecturally support cloud adoption and deliver the performance and security required by highly distributed enterprises. These outdated solutions have become more costly and complicated to implement, install, manage, and maintain.SD-WAN offers unlimited capabilities for accessing the benefits of the cloud and Internet. ...
"DevOps is set to be one of the most profound disruptions to hit IT in decades," said Andi Mann. "It is a natural extension of cloud computing, and I have seen both firsthand and in independent research the fantastic results DevOps delivers. So I am excited to help the great team at @DevOpsSUMMIT and CloudEXPO tell the world how they can leverage this emerging disruptive trend."
In this presentation, you will learn first hand what works and what doesn't while architecting and deploying OpenStack. Some of the topics will include:- best practices for creating repeatable deployments of OpenStack- multi-site considerations- how to customize OpenStack to integrate with your existing systems and security best practices.
Security, data privacy, reliability and regulatory compliance are critical factors when evaluating whether to move business applications from in-house client hosted environments to a cloud platform. In her session at 18th Cloud Expo, Vandana Viswanathan, Associate Director at Cognizant, In this session, will provide an orientation to the five stages required to implement a cloud hosted solution validation strategy.
Business professionals no longer wonder if they'll migrate to the cloud; it's now a matter of when. The cloud environment has proved to be a major force in transitioning to an agile business model that enables quick decisions and fast implementation that solidify customer relationships. And when the cloud is combined with the power of cognitive computing, it drives innovation and transformation that achieves astounding competitive advantage.
Everyone wants the rainbow - reduced IT costs, scalability, continuity, flexibility, manageability, and innovation. But in order to get to that collaboration rainbow, you need the cloud! In this presentation, we'll cover three areas: First - the rainbow of benefits from cloud collaboration. There are many different reasons why more and more companies and institutions are moving to the cloud. Benefits include: cost savings (reducing on-prem infrastructure, reducing data center foot print, redu...
DXWorldEXPO LLC announced today that "IoT Now" was named media sponsor of CloudEXPO | DXWorldEXPO 2018 New York, which will take place on November 11-13, 2018 in New York City, NY. IoT Now explores the evolving opportunities and challenges facing CSPs, and it passes on some lessons learned from those who have taken the first steps in next-gen IoT services.
Founded in 2000, Chetu Inc. is a global provider of customized software development solutions and IT staff augmentation services for software technology providers. By providing clients with unparalleled niche technology expertise and industry experience, Chetu has become the premiere long-term, back-end software development partner for start-ups, SMBs, and Fortune 500 companies. Chetu is headquartered in Plantation, Florida, with thirteen offices throughout the U.S. and abroad.
DXWorldEXPO LLC announced today that ICC-USA, a computer systems integrator and server manufacturing company focused on developing products and product appliances, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City. ICC is a computer systems integrator and server manufacturing company focused on developing products and product appliances to meet a wide range of ...
SYS-CON Events announced today that DatacenterDynamics has been named “Media Sponsor” of SYS-CON's 18th International Cloud Expo, which will take place on June 7–9, 2016, at the Javits Center in New York City, NY. DatacenterDynamics is a brand of DCD Group, a global B2B media and publishing company that develops products to help senior professionals in the world's most ICT dependent organizations make risk-based infrastructure and capacity decisions.
René Bostic is the Technical VP of the IBM Cloud Unit in North America. Enjoying her career with IBM during the modern millennial technological era, she is an expert in cloud computing, DevOps and emerging cloud technologies such as Blockchain. Her strengths and core competencies include a proven record of accomplishments in consensus building at all levels to assess, plan, and implement enterprise and cloud computing solutions. René is a member of the Society of Women Engineers (SWE) and a m...
The technologies behind big data and cloud computing are converging quickly, offering businesses new capabilities for fast, easy, wide-ranging access to data. However, to capitalize on the cost-efficiencies and time-to-value opportunities of analytics in the cloud, big data and cloud technologies must be integrated and managed properly. Pythian's Director of Big Data and Data Science, Danil Zburivsky will explore: The main technology components and best practices being deployed to take advantage...