Broadcom (AVGO) Credit Rating Raised to BBB- from 'BB+ at S&P; Outlook Stable

S&P Global Ratings today said it raised its corporate credit rating on Singapore-based Broadcom Ltd. (NASDAQ: AVGO) to 'BBB-' from 'BB+'. The outlook is stable.

At the same time, we affirmed the 'BBB-'issue level ratings on the company's secured debt and the 'BB+' issue level ratings on the unsecured notes. We are withdrawing the recovery ratings in accordance with our methodology for investment-grade ratings.

"We base our upgrade on the expectation that Broadcom's clearly defined financial policy will provide sufficient support for its shareholder remuneration and strategic growth objectives while operating within a 2x-3x leverage range," said S&P Global Ratings credit analyst Jenny Chang.

The upgrade also reflects the company's large scale, overall solid competitive position within wireless and other industrial semiconductor markets. Over the past several years, the company has efficiently integrated large scale acquisitions and rapidly reduced debt balances incurred. We expect the recently announced acquisition of Brocade will not materially alter credit measures and only modestly increase leverage to the mid-2x area at close from about 2x currently. Although we believe the company will continue to assess a range of merger and acquisition (M&A) opportunities that meet its articulated criteria, we expect the company will adhere to its stated financial policy and fund those initiatives without diminishing overall credit quality. Additionally, given favorable growth prospects across business segments, its considerable scale and cost discipline, we believe Broadcom will continue to drive operating efficiency and strengthen its balance sheet.

The stable outlook reflects our expectation that Broadcom will manage future capital allocation in a manner consistent with its stated financial policy and maintain leverage under 3x, supported by its strong market positions, favorable operating trends and considerable free cash flow generation.

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