Moody's may cut Flextronics, lift Solectron

Moody's Investors Service said it placed the ratings of Flextronics International Ltd. on review for possible downgrade and the notes of Solectron Corp. on review for possible upgrade following the companies' announcement that they have entered into a definitive agreement under which Flextronics will acquire Solectron for $3.6 billion.

Ratings on review include Flextronics' Ba1 corporate family rating and Ba2 senior subordinated notes and Solectron's B3 convertible senior notes and B3 senior subordinated notes.

Flextronics' review for possible downgrade reflects the potential for increased financial leverage to result if the transaction closes as planned, the agency said, and Solectron's review for possible upgrade reflects the potential increased scale and client diversity provided by the merger.

Moody's said the reviews will focus on the combined company's prospects for acquisition spending, asset rationalization, asset returns and client retention, as well as its definitive capital structure and the timing for restructuring actions and a restoration of more consistent free cash flow.

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