Moody’s rates Avnet notes Baa3

Moody's Investors Service said it assigned a Baa3 rating to Avnet, Inc.'s proposed $500 million 10-year senior unsecured note offering.

Proceeds will be used for general corporate purposes, including a reduction in short-term debt.

The outlook is stable.

Moody’s said Avnet benefits from substantial scale and geographic breadth as one of the leading global distributors of electronic components and information technology (IT) products, yet also has considerable reach into the growing small and medium-sized business (SMB) customer base.

Although Avnet's revenues are highly correlated to the volatile semiconductor industry, IT procurement cycles and the global economy, the agency expects Avnet to deliver steady operating profits margins, helped by its ongoing cost reductions and the countercyclical nature of its working capital utilization.

Over the next 12 to 18 months, Moody’s said Avnet should produce strong free cash flow and maintain very good liquidity, important given the expectations of very tight adjusted operating margins in the range of 2.5% to 3.5%. It expects Avnet to apply a balanced approach to its capital allocation over the next year between acquisitions, shareholder payouts and modest debt reduction.

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