S&P rates RF Micro Devices convertibles B-

Standard & Poor's assigned a B+ corporate credit and B- subordinated note ratings to RF Micro Devices Inc. The outlook is negative.

The Greensboro, N.C.-based company supplies power amplifiers for cellular phones, 41% of sales, and other wireless handset semiconductors. It had debt of $374 million at Aug. 6.

The ratings reflect a narrow customer base, limited profitability and cash flows, plus high leverage, offset by a good position in its niche market and strong customer relationships, S&P said.

Debt of $374 million at Aug. 6 was high at 5x EBITDA for the four quarters ended June 2003. Cash balances, $301 million at that date, are sufficient for operating purposes.

RF Micro Devices had invested $30 million in Jazz Semiconductor Inc. in October 2002 and will invest an additional $30 million in the December quarter. Capital expenditures in 2004 are expected to be around $35 million to $40 million.

Maturities should be manageable, $108 million in 2005, well below current cash balances and assuming continued cash flows near recent levels, S&P added.

Substantial competitive pressures and marketplace volatility could pressure revenues and operating profitability, given the narrow business position and rising cost structure.

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