Moody's rates Tech Data convertible Ba2

Moody's Investors Service said it assigned a Ba2 rating with a loss-given-default assessment of LGD6 (94%) to Tech Data Corp.'s proposed offering of up to $350 million convertible senior notes due 2026 and affirmed the company's Ba1 corporate family and probability-of-default ratings.

The outlook is negative.

The net proceeds from the offering will be used primarily to pay down Tech Data's higher interest bearing intra-quarter debt and enhance the company's liquidity position.

The agency said Tech Data is expected to save about $9 million in annual net interest expense through this offering. In May 2005, Tech Data implemented a restructuring program to improve the cost structure and productivity of its EMEA operations and has incurred $55 million of total cash restructuring costs, which should generate annualized cost savings of the same amount. It is Moody's understanding that Tech Data has completed the restructuring program and expects no further cash charges.

The negative outlook reflects increasing competitive pricing pressures, steady gross margin decline, continued weakness in the EMEA operations and weakened operating profitability on a year-over-year basis, Moody's said.

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