Fitch rates II-VI loans BB+

Fitch Ratings said it assigned a BB first-time issuer default rating to II-VI Inc. in conjunction with the company's financing associated with its planned merger with Finisar Corp.

Fitch also said it assigned BB+ rating with recovery rating of RR1 to the senior secured first-lien credit facility and term loans.

The outlook is stable.

The ratings reflect II-VI's pro forma position as a market leader in photonics and compound semiconductors, the agency said.

The company will be well-positioned to capitalize on major secular trends, including the development of next-generation networks, hyperscale datacenters and 5G mobile infrastructures, Fitch said.

The combined company will have a significant platform for 3D sensing and LiDAR with applications for mobile devices at present as well as automotive and industrial applications, the agency said.

Closing leverage of 5.4x is expected to decline to 3.5x within one year, Fitch said.

II-VI combined with Finisar will be a top five to No. 1 player in several segments of its market, the agency said, somewhat offset by a 30-point increase in communications end-market concentration, the agency said.

Fitch said it expects the combined company will experience an acceleration of growth and associated margin expansion, although the agency said it takes a more conservative view of sub segment growth potential in the near- and intermediate-terms.

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