Moody's changes Flextronics outlook to stable

Moody's Investors Service said it revised its outlook for Flextronics International Ltd. to stable from negative.

The change affects the company's $400 million of 6.5% senior subordinated debentures due 2013, the €150 million of 9.75% senior subordinated debentures due 2010, and the $7.7 million of 9.875% senior subordinated debentures due 2010, all rated Ba2.

Moody's said the outlook change results from the Nov. 26 announcement that Flextronics had reached a full settlement with Beckman Coulter Inc. Terms of the settlement included the company agreeing to pay $23 million to Beckman to completely resolve the underlying contract dispute.

This agreement follows a Sept. 24 jury verdict in which a $934 million judgment was awarded in favor of Beckman relating to economic duress and breach of contract involving an outsourced manufacturing arrangement, which the plaintiff had established with a company subsequently acquired by Flextronics (in response to this jury verdict, Moody's lowered Flextronics' rating outlook to negative from stable).

Moody's said that in light of Flextronics' very good liquidity situation ($1.3 billion in aggregate, consisting of cash and cash equivalents totaling $700 million, covenant-driven revolver availability of $532 million, and accounts receivable sales availability via a conduit program of $100 million), this monetary settlement will neither materially impact Flextronics' financial condition nor its overall capital structure.

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