Moody's: Freescale outlook stable

Moody's Investors Service said it affirmed Freescale Semiconductor, Inc.'s Caa1 corporate family and probability-of-default ratings, and changed the outlook to stable from negative.

The agency also affirmed the company's senior secured revolving credit facility and term loan facility at B2 (LGD3, 30% from LGD2, 29%), senior unsecured notes at Caa2 (LGD5, 80% from 79%) and senior subordinated unsecured notes at Caa3 (LGD6, 94%).

The change in outlook reflects the company's improved operating performance in the most recent fiscal quarter as a result of the recovery in the global demand environment and Freescale's progress in eliminating $650 million of annualized costs, according to agency.

Freescale's Caa1 corporate family rating is constrained by its substantial leverage and thin interest coverage, as well as the expectation of very modest free cash flow generation, the agency said.

The rating also reflects a significantly reduced earnings contribution from the company's cellular segment, which was considerably downsized, offset by modest earnings from Freescale's recent entrée into higher growth sub-segments within consumer and industrial markets, the agency noted.

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