S&P puts Infineon on watch

S&P said it placed the BBB long-term issuer credit and issue ratings on Infineon Technologies AG on CreditWatch with negative implications.

Infineon plans to acquire Cypress Semiconductor Corp. for €9 billion, the agency said, and finance the acquisition primarily with debt.

The negative watch reflects that the agency could downgrade Infineon by one notch once the transaction is completed, which is expected in late 2019 or early 2020, the agency said.

The acquisition is seen as improving Infineon's scale, market positions, diversification and revenue growth prospects, S&P said.

It also is expected to strengthen the company’s profitability and cash flows once Cypress is fully integrated, the agency added.

That said, the agency said it expects Infineon's adjusted debt-to-EBITDA will weaken to 2x to 3x in fiscal years 2020 and 2021 as a result of the financing, S&P said.

The agency said it intends to resolve the CreditWatch when the transaction closes and after assessing Infineon's capital structure at closing, its cash flow prospects and management's plan to deleverage and integrate Cypress.

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