S&P Raises Xilinx to 'A-'; Removes from CreditWatch
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Standard & Poor's Ratings Services today raised its unsolicited long-term corporate credit rating on San Jose, Calif-based semiconductor manufacturer Xilinx Inc. (Nasdaq: XLNX) to 'A-' from 'BBB+'. At the same time, we removed the unsolicited corporate credit rating from CreditWatch, where we placed it with positive implications on Nov. 26, 2013. The outlook is stable. We are also raising our unsolicited senior unsecured debt rating to 'A-' and junior subordinate debt rating to 'BBB' after having also removed them from CreditWatch.
"We base our upgrade primarily on a reassessment of the surplus cash on Xilinx's balance sheet," said Standard & Poor's credit analyst Andrew Chang. "The upgrade reflects our view that Xilinx is likely to maintain sizable cash balances, part of which we consider to be surplus cash. We expect Xilinx to increase its shareholder return activities in coming years given its rising cash balance, but we also believe that its financial policies will remain consistent with the rating," added Mr. Chang.
In calculating Xilinx's leverage, we net against debt the portion of cash that we regard as surplus. This, combined with our forecast for continued strong EBITDA generation over the intermediate term, leads us to assess Xilinx's financial risk profile as minimal.
Our assessment of Xilinx's financial risk profile as minimal also reflects our forecast for continued strong free cash flow generation through industry cycles given its high profit margins and limited capital investment needs. Xilinx holds about $3.7 billion in cash, the majority of which we estimate is held abroad. Xilinx is likely to maintain a sizeable surplus cash balance, which we net against adjusted debt of about $1.3 billion, improving its credit ratios to the minimal financial risk profile.
"We base our upgrade primarily on a reassessment of the surplus cash on Xilinx's balance sheet," said Standard & Poor's credit analyst Andrew Chang. "The upgrade reflects our view that Xilinx is likely to maintain sizable cash balances, part of which we consider to be surplus cash. We expect Xilinx to increase its shareholder return activities in coming years given its rising cash balance, but we also believe that its financial policies will remain consistent with the rating," added Mr. Chang.
In calculating Xilinx's leverage, we net against debt the portion of cash that we regard as surplus. This, combined with our forecast for continued strong EBITDA generation over the intermediate term, leads us to assess Xilinx's financial risk profile as minimal.
Our assessment of Xilinx's financial risk profile as minimal also reflects our forecast for continued strong free cash flow generation through industry cycles given its high profit margins and limited capital investment needs. Xilinx holds about $3.7 billion in cash, the majority of which we estimate is held abroad. Xilinx is likely to maintain a sizeable surplus cash balance, which we net against adjusted debt of about $1.3 billion, improving its credit ratios to the minimal financial risk profile.
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