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TTM Technologies, Inc. -- Moody's assigns Ba3 rating to TTM's senior unsecured note issuance

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Rating Action: Moody's assigns Ba3 rating to TTM's senior unsecured note issuanceGlobal Credit Research - 23 Feb 2021New York, February 23, 2021 -- Moody's Investors Service ("Moody's") has assigned a Ba3 senior unsecured rating to TTM Technologies, Inc. ("TTM") proposed offering of $500 million of new senior unsecured notes. Existing ratings including the Ba2 corporate family rating (CFR), Ba1 senior secured credit facility rating, SGL-1 Speculative Grade Liquidity rating, and the stable outlook are unchanged. The net proceeds from the offering will be used to redeem the existing $375 million senior unsecured notes, to repay $40 million of outstanding balances under the revolving credit facility, and for general corporate purposes.Assignments:..Issuer: TTM Technologies, Inc.....Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD5)RATINGS RATIONALETTM's credit profile benefits from differentiated PCB and RF product capabilities and market positions, and broad diversification across end markets. These characteristics have supported financial performance during the 2020 recession, with both revenues and EBITDA growing slightly (pro forma for divestitures) despite declines in some end markets. In 2020, TTM divested its Mobility business unit for total proceeds of $652 million (including retained accounts receivable), and discontinued its EMS operations. These actions have resulted in a meaningful mix shift toward markets with relatively high stability in which TTM has differentiated positions, notably A&D which accounts for 37% of pro forma revenues in 2020. However, the company remains exposed to cyclical end markets and to operating decisions of large OEM and EMS customers. Profitability is solid with pro forma 2020 EBITDA margin of 13%, and the business model is strongly cash flow generative with estimated pro forma free cash flow of $115 million in 2020.TTM used Mobility sale proceeds to prepay $400 million of term loan and used internally generated funds to repay the $250 million convertible notes that matured in December 2020. As a result, Moody's-adjusted total leverage pro forma for the Mobility divestiture and EMS exit declined to 3.3x at the end of 2020. Cash balances remained very strong at $452 million at the end of 2020 after the repayment of convertible notes, collection of Mobility receivables, payment of taxes on the Mobility sale and the majority of EMS restructuring costs. Net of the cash balances, pro forma Moody's-adjusted net leverage at the end of 2020 was 1.6x. TTM targeted deleveraging to net leverage of less than 2x following the acquisition of Anaren in 2018 and this target has been achieved. The proposed senior unsecured notes issuance and repayment of existing notes and outstanding revolver balances results in a slight increase in pro forma Moody's-adjusted total leverage to 3.6x and net leverage to 1.7x as of December 2020. TTM will continue to evaluate acquisitions over time and has ample financial flexibility. If the company pursues a larger debt-financed acquisition, Moody's expects it to direct free cash flow toward debt repayment to promptly reduce leverage to the company's stated target net leverage level of less than 2x.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe stable outlook reflects Moody's expectation of modest revenue growth in 2021 and Moody's adjusted total leverage remaining around 3.5x. The ratings could be upgraded if TTM increases its business scale meaningfully and continues to diversify, generates consistent revenue growth and expands EBITDA margins, and maintains Moody's adjusted total leverage below 2.5x. The ratings could be downgraded if TTM experiences a sustained revenue or margin decline, or if Moody's adjusted total leverage is sustained above 4.0x and liquidity meaningfully weakens.The principal methodology used in this rating was Manufacturing Methodology published in March 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1206079. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.With revenues of $2 billion in 2020 pro forma for divestitures, TTM is a global leader in manufacturing of printed circuit boards and radio frequency components across a broad suite of end market applications.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.This rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Peter Krukovsky Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Lenny J. Ajzenman Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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