S&P Assigns 'BBB-' Rating to Cadence Design Systems (CDNS)

Standard & Poor's Ratings Services said it assigned a 'BBB-' corporate credit rating to San Jose, Calif.-based Cadence Design Systems (Nasdaq: CDNS). The outlook is stable.

At the same time, we assigned our 'BBB-' issue-level rating to the company's $350 million debt securities contemplated by the registration statement and $250 million amended unsecured revolving credit facility due 2019.

"The ratings on Cadence reflect the company's strong market share and customer relationships in the electronic design automation industry, offset somewhat by limited scale and narrow end-market focus compared to investment-grade software peers," said Standard & Poor's credit analyst James Thomas.

We view Cadence's financial risk profile as "minimal" due to pro-forma leverage below 0.5x.

The outlook is stable, reflecting our expectation that the company's solid position within semiconductor design software markets and its high degree of contractual revenues will enable it to retain its market position through semiconductor business cycles.

We could lower the rating if the company were to adopt more aggressive financial policies toward either acquisitions or shareholder returns, which would raise leverage over 2x on a sustained basis.

Ratings upside is currently limited by Cadence's relatively modest scale, narrow end-market focus, and potential volatility from semiconductor industry cyclicality.

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