S&P cuts Flextronics outlook to negative

Standard & Poor's confirmed its ratings on Flextronics International Ltd. including its senior secured debt at BB+ and subordinated debt at BB- but revised the outlook to negative from stable, following the jury verdict against the company in favor of Beckman Coulter Inc. totaling $934 million.

The judge presiding over the case is expected to enter a judgment on the jury's verdict following a hearing on Oct. 23 at which time the award may be reduced. But the outlook revision reflects uncertainties regarding the outcome of the review and the ultimate size of the award following an appeal, if necessary.

In addition, Flextronics may be required to post bond in an appeal up to a maximum cap of $150 million.

Despite the unusually large punitive component of the jury award in the contract dispute and Flextronics' expectation of an ultimate liability of less than $10 million, the $931 million jury verdict raises the possibility of a significant future payment, S&P said.

Although ratings are constrained by operational challenges associated with realigning Flextronics' operations to difficult end-market conditions, the long-term nature of the company's customer relationships and its moderate financial profile provide ratings protection, absent the jury verdict.

If the jury award is materially reduced, the outlook could be revised to stable, given Flextronics' liquidity and debt profile, S&P said.

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