Moody's cuts Kulicke & Soffa convertibles to Caa2

Moody's Investors Service lowered the ratings of Kulicke & Soffa Industries Inc.'s debt, including its two convertible issues to Caa2 from B3, based on a continued draw down of cash and less in research and development spending that could delay ATX 2 - its forthcoming platform of wire bonding equipment.

The outlook is stable, taking into account market firming trends that have led to somewhat more robust ordering patterns and some indications that the use of cash to fund operating losses may be abating.

The company has aggressively restructured its manufacturing operations over the past two years, moving much of its supply chain to China, and over the past five quarters has brought down its SG&A expense by one-third.

Debt is exceedingly high, both in relation to cash flow, which measured by last 12 months EBITDA has been negative, and in proportion to balance sheet assets, Moody's added.

Cash and investments were about $60 million at fiscal third quarter, versus $203 million at fiscal yearend 2001. But the cash position is beginning to stabilize after eight consecutive quarters of negative cash flow from operations.

S&P cuts Technip

Standard & Poor's downgraded Technip including cutting its €793.5 million 1% convertible bonds due 2007 to BBB+ from A-. The outlook is stable.

S&P said the rating action reflects the deterioration of Technip's capital structure during the first half of 2003 and S&P's expectation that the company is unlikely to achieve credit protection measures in line with its former A- rating by year-end.

Nevertheless the BBB+ rating acknowledges the strong positions that Technip holds in its main business lines as well as the company's moderate financial profile, S&P added.

S&P added that it believes Technip's management remains committed to credit quality and that the company will meet credit protection measures in line with its new rating, such as lease-adjusted FFO to net debt of 40% and EBITDA interest coverage of 7x.

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