Moody's downgrades ASAT

Moody's Investors Service said it downgraded ASAT Holdings Ltd.'s corporate family rating and New ASAT (Finance) Ltd.'s $150 million senior notes due 2011 to Caa1 from B3 following ASAT's announcement of weaker-than-expected results for the third quarter of fiscal 2007, which left Moody's concerned about the ability of ASAT's cash flow generation to service its near-term financial obligations.

The outlook is negative.

The slower-than-expected revenue ramp-up reflects ASAT's exposure to the volatility that results from outsourcing customer orders and the seasonality of the semiconductor cycle, the agency said, adding that the company's current scale and balance sheet liquidity make it relatively more vulnerable to seasonal volatilities occurring within the industry.

While the company generated positive operating cash flow in the third quarter due to working capital improvements and has an improved cost structure following the relocation of its operating assets to China from Hong Kong, Moody's said the overall operating performance has been negatively affected by seasonal industry volatilities and that ASAT exhibits tight balance sheet liquidity, with current estimated cash on hand falling below $10 million after servicing a $7 million coupon payment on the senior notes in February.

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