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Electronics Production | June 07, 2007

Sanmina-SCI to offer $600M in debt

Fitch has assigned a 'BB+/RR1' rating to Sanmina-SCI proposed $600 million offering of senior unsecured floating rate notes (FRN).
The two-tranche debt offering consists of $300 million of notes due 2010 and $300 million due 2014. Proceeds from the offering and cash on hand will be utilized to repay an existing $600 million senior unsecured term loan and to fund related fees and expenses. Fitch expects a difficult competitive environment within the EMS industry in 2007 driven by continued pricing pressure from Asian EMS and original design manufacturing (ODM) vendors as well as a continued trend by original equipment manufacturers (OEMs) to consolidate EMS vendors, both of which could hamper efforts to improve the operating performance at Sanmina. The company is currently evaluating its strategy and position within the market and recently announced a shift in its ODM business to a joint design manufacturing (JDM) model. In addition, Sanmina is considering various strategic alternatives for its low margin personal computing, low-end server and storage businesses. Actions that could potentially stabilize Sanmina's ratings include a divestiture of lower margin businesses to improve overall operating performance and/or the use of proceeds from asset divestitures to pay down debt.
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