S&P trims Western Digital

S&P said it trimmed its ratings on Western Digital Corp. and its senior unsecured notes to BB from BB+. The 3 recovery rating for the notes is unchanged.

“The downgrade reflects spiking leverage and weaker cash flow. While our estimated leverage of 2.4x for the last 12 months as of the September quarter remains below our 3x downgrade threshold, we expect quarterly annualized leverage of low-7x next quarter and fiscal 2023 leverage to approach 6x. Also, cash flow is weaker through the cycle than we anticipated,” S&P said in a press release.

The agency said it forecasts Western Digital’s 2023 adjusted FOCF to be negative $1.4 billion, including a $650 million payment to settle an IRS dispute.

The outlook is stable.

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