S&P could put Flextronics on watch if large bond required

Standard & Poor's said it could put Flextronics International Ltd. on CreditWatch negative if a large bond is required to appeal the jury verdict that awarded $934 million to Beckman Coulter Inc.

At the moment S&P rates Flextronics' corporate credit at BB+ with a negative outlook and the ratings are currently not affected - although S&P lowered the outlook to negative following the jury's verdict on Sept. 24, which awarded $3 million in contract and tort damages and $931 million in punitive damages to Beckman Coulter.

Despite the large punitive component of the award and management's expectation of an ultimate liability of less than $10 million, the negative outlook reflects uncertainties regarding the outcome of the hearing and the ultimate size of the award following an appeal, if one is required.

On Oct. 1, Flextronics and Beckman Coulter entered settlement talks. Although the $150 million cap on bonding requirements in the state of California would appear to apply only to tobacco companies, S&P recognizes that the parties may agree to a settlement, that the judge could reduce the award or set aside the verdict at the Nov. 25 hearing, or that the court could reduce the bonding requirement.

Nevertheless, the possibility exists that, in order to appeal, Flextronics could be required to post a significant bond of 1.5x the judgment amount following the Nov. 25 hearing, at which time, ratings would be placed on CreditWatch with negative implications, S&P said.

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