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Moody's affirms MagnaChip
Moody's Investors Service said it affirmed MagnaChip Semiconductor Corp.'s Caa1 corporate family rating and the Caa1 rating on its $225 million of 6 5/8% notes due 2021 following the filing of the company's restated financial results with the Securities and Exchange Commission on Feb. 12. The outlook remains negative.
The impact of MagnaChip's restatement of its revenues and earnings was more significant than Moody's had expected. In particular, the restatement adjustments on revenue recognition were the most severely negatively affected in the first nine months of 2013 and totaled $78 million, with additional factors contributing another $2 million, the agency said.
“The weak financial results for fiscal year 2013 and also in the first nine months of 2014 indicate significant operational challenges, which, when coupled with the company's high level of expenses related to the restatement process and legal costs, have significantly deteriorated the company's profitability and cash flows," Annalisa DiChiara, a Moody's vice president and senior analyst, said in an agency news release.
On June 20, 2014, the company was served a notice of default for breaching a financial reporting covenant under the bond indenture. Moody's ratings for MagnaChip assume that the recent filing of the financial reports has cured the covenant breach and has averted a potential notes acceleration, which was due to trigger on Feb. 14.
The agency said the negative outlook reflects the challenges the company needs to overcome to restore its operating and financial profile, including generating positive earnings and cash flows, as well as the successful completion of the remediation of material weaknesses in its internal controls.
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