S&P gives A- to Foundry JV notes

S&P said it preliminarily assigned an A- rating to Foundry JV Holdco LLC’s $1 billion of Rule 144A notes due on Jan. 25, 2034. The outlook is negative.

Brookfield Asset Management created a project finance holding company, HoldCo, to enable its investment as part of a joint venture with Intel Corp.

“While Intel is not guaranteeing the debt obligations of HoldCo, Intel bears the construction and wafer production risks; HoldCo retains the risks of refinancing, breakage costs, and special-purpose vehicle (SPV) cost escalation. We, therefore, view HoldCo's credit quality to be close to but not equivalent to Intel's. We adjust the debt rating on HoldCo down one notch from the issuer rating on Intel. Arizona Fab LLC (JV Company), while highly strategic to Intel, is not core, in our view. The notch also reflects the absence of structural features that are typically part of a project financing, especially the absence of an asset pledge, which is a credit weakness,” S&P said in a press release.

The proceeds will be used to repay/refinance the principal drawn under the bank facilities. Brookfield expects it will continue to issue a mixture of public and private notes to pay down its five- and seven-year bank facility draws.

“The negative outlook mirrors the outlook on Intel because HoldCo relies on Intel to make minimum revenue payments sufficient to repay HoldCo's debt. We expect that while the construction term loans are outstanding, HoldCo will maintain a debt service coverage ratio (DSCR) no lower than 1.13x in most periods (under S&P Global Ratings' downside scenario described below),” S&P noted.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.