Moody's lowers ams-Osram

Moody's Investors Service said it downgraded ams-Osram AG’s instrument ratings of the €850 million and $450 million guaranteed senior unsecured bonds to B1 from Ba3. The agency also lowered the corporate family rating and probability of default rating to B1 from Ba3 and to B1-PD from Ba3-PD. Concurrently, Moody's changed the outlook to stable from negative.

"The rating downgrade to B1 reflects the slower than expected achievement in margin improvement and related high leverage for a prolonged period following the acquisition of Osram," said Dirk Goedde, a Moody's vice president and lead analyst for ams-Osram, in a press release.

"While we see continuous progress on the integration of Osram and path towards margin expansion, financial metrics are not commensurate with the Ba3 rating category, and we believe cost pass-through can become difficult going forward," added Goedde. "In addition, we see risks of lower demand from end customers amidst the recent inflationary pressure on discretionary income which would weigh further on profitability."

The improved outlook reflects the forecast that margins will be comfortably in the low double-digit range in percentage terms (Moody's adjusted EBITA), even with lower demand, due to the company's efficiency measures and good business diversification, Moody’s said.

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