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S&P places Infineon's BBB ratings on CreditWatch with negative implications

S&P Global Ratings placed Infineon Technologies AG's BBB long-term issuer credit and issue ratings on CreditWatch with negative implications.

Ratings cited the semiconductor manufacturer's announcement that it will use debt to finance about 70% of its €9 billion acquisition of Cypress Semiconductor Corp. as the reason behind the action.

The rating agency expects the debt financing to weaken Infineon's credit metrics, pushing S&P Global Ratings-adjusted debt to EBITDA to about 3x in fiscal 2020, from the current expectation of less than 0.5x for fiscal 2019. Infineon has committed to maintaining a gross leverage target of lower than 2x.

While the acquisition is expected to add about 29% in revenue, Ratings said it is uncertain how soon Infineon will be able to bring its leverage down to a level that corresponds with its adjusted debt-to-EBITDA target.

The rating agency said it expects to resolve the CreditWatch placement after the completion of the acquisition and the evaluation of Infineon's capital structure, cash flow prospects and its plans to reduce debt.

It said the company's ratings could be downgraded if the agency expects adjusted debt to EBITDA to remain greater than 2x by fiscal 2021 or if Infineon's free operating cash flow generation remains lower than €300 million on a "prolonged basis."

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.