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STATS ChipPAC's Ba3 ratings remain on review for downgrade: Moody's

Moody's Investors Service says STATS ChipPAC Ltd Ba3 corporate family rating and senior unsecured bond rating ratings remain on review for downgrade as JCET-SC (Singapore) Pte.

[Hong Kong] Moody's Investors Service says STATS ChipPAC Ltd Ba3 corporate family rating and senior unsecured bond rating ratings remain on review for downgrade as JCET-SC (Singapore) Pte Ltd's pre-conditional voluntary offer to acquire STATS ChipPAC Ltd remains outstanding.

STATS ChipPAC's ratings were put on review for downgrade on November, 10, 2014 after Jiangsu Changjiang Electronics Technology Co, Ltd, a leading electronics packaging service provider in China, made a non-binding proposal to acquire all STATS ChipPAC's shares on a fully diluted basis for an aggregate purchase price of US$780 million.

Further, on December 30, 2014, JCET-SC, a subsidiary of JCET, announced it intends to make a voluntary conditional cash offer for all the shares in STATS ChipPAC subject to the fulfilment of certain conditions. The purchase price of US$780 million was in line with its original non-binding proposal made in November 2014.

JCET; the National Integrated Circuit Industry Investment Fund Co, Ltd; and SilTech Semiconductor (Shanghai) Corporation Limited -- a subsidiary of Semiconductor Manufacturing International Corporation, have formed a consortium to undertake the offer.

Pre-conditions to the making of the offer by JCET-SC notably include (1) regulatory and shareholder approvals; (2) Singapore court approval of the Taiwan capital reduction; and (3) STATS ChipPAC consolidated aggregate debt being below US$1.28 billion at the earlier of April 30, 2015 or the date of the offer announcement.

The consolidated aggregate debt excludes any debt to be incurred by its Taiwan subsidiaries to repay intercompany debt owing to the company.

No further details regarding adherence or non-adherence to the pre-conditions have been made to date, nor has JCET disclosed any details regarding the funding arrangements for the acquisition.

Moody's notes that if the pre-conditions are not fulfilled before 5pm on June 30, 2015 or such later date as the parties may agree, the offer will not be made.

If the transaction is successful and Temasek Holdings (Private) Limited's shareholding falls below 34 per cent, this would trigger the change of control put option on STATS ChipPAC's senior unsecured bonds due 2016 and 2018, totaling US$811 million. There are no ratings triggers. This means bond holders could put the bonds back to the company at 101.

Assuming all bonds are put back to the company, the funding requirements for the acquisition would increase by an additional US$819 million.

Moody's review continues to wait for further detail on (1) the fulfilment of the pre-conditions (2) the final the terms and conditions of the sale, including the funding arrangements at each JCET-SC and STATS ChipPAC, particularly with respect to the funding for any bonds that are put and (3) the organisational structure of the combined entity.

Moody's will also review the overall operational and financial impact of the acquisition on STATS ChipPAC's credit profile, should a definitive deal be struck.

If the deal were to fail to materialise, and there is no fundamental change to STATS ChipPAC's business and financial profile, then the outlook could revert to stable at the Ba3 level.

The principal methodology used in these ratings was Global Semiconductor Industry Methodology published in December 2012. Please see the Credit Policy page on for a copy of this methodology.

STATS ChipPAC is the fourth-largest player in the OSAT (Outsourcing Semiconductor Assembly and Test) industry. It provides full turnkey solutions to semiconductor companies, among them foundries, integrated device manufacturers, and fabless companies in the US, Europe, and Asia.