Fitch downgrades Flextronics

Fitch Ratings said it downgraded Flextronics International Ltd.'s issuer default rating to BB+ from BBB-, senior unsecured credit facility to BB+ from BBB- and senior subordinated notes to BB from BB+.

The outlook is stable.

The downgrade reflects Fitch's expectations that Flextronics will continue to operate near historically low margin levels - which compares with Fitch's prior expectations for material margin expansion for the core EMS business - and will experience negative free-cash flow through March 2008 while investing heavily in expanded manufacturing capacity and working capital to support a significant expected increase in revenue.

These factors are somewhat mitigated by the agency's belief that Flextronics is at an inflection point as the company is beginning to benefit from its original design manufacturer and vertical integration strategy after several years of disappointing results that negatively impacted profitability.

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