S&P puts STMicroelectronics on watch

Standard & Poor's said it placed its A- long-term corporate credit and senior unsecured debt ratings on STMicroelectronics NV on CreditWatch with negative implications and affirmed the company's A-2 short-term rating.

The CreditWatch placement follows STMicroelectronics' announcement that it plans to combine its wireless semiconductor business with that of NXP BV to form a joint venture with pro forma 2007 revenues of about $3 billion. The transaction will give STMicroelectronics an 80% equity stake in the joint venture involving an upfront payment of $1.55 billion to NXP and a $350 million cash injection into the joint venture for working capital. The remaining 20% of the joint venture's equity will be subject to crossed put/call options exercisable after three years.

The agency said this transaction comes shortly after the separation of STMicroelectronics' loss-making flash memory business on terms less credit-protective than S&P initially expected and the recent revision of the company's outlook to negative from stable.

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