Fitch lifts Avago, loan, rates loan BBB

Fitch Ratings said it upgraded Avago Technologies Finance Pte. Ltd.’s long-term issuer default rating to BBB- from BB+ and existing senior secured credit facility to BBB from BBB-/RR1.

Additionally, the agency assigned a BBB rating to Avago Technologies Cayman Finance Ltd.’s proposed $7 billion seven-year senior secured term loan B.

The outlook is stable.

Pro forma for the term loan, the actions affect $11.5 billion, including the undrawn revolving credit facility.

Avago will use net proceeds from the term loan to fund a portion of Avago Technologies Ltd.'s acquisition of Broadcom Corp. Avago plans to fund a significant portion of the merger with common stock and about $23.3 billion with new debt and available cash at the time of closing.

Fitch said the ratings and outlook reflect the company’s strengthened operating profile following the Broadcom acquisition as the acquisition is expected to more than double revenue and diversify Avago's sales and profit mix. Pro forma for the acquisition, Avago will be the third largest U.S. semiconductor provider, with more than $15 billion of annual revenues.

The deal also reduces Avago's reliance on smart phones, as the wireless communications segment will decline to 16% of sales after the combination from 38% on a standalone basis.

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