Moody's Investors Service downgraded the senior debt ratings of STMicroelectronics NV on Wednesday to reflect increased risk and leverage after the Switzerland-based chip maker combined its wireless operations with those of NXP Semiconductors.
Moody's also attributed the downgrade to the company's exposure to weakness in the U.S. dollar.
The investment-grade senior debt ratings were lowered to "Baa1" from "A3." Moody's said the ratings outlook is stable. About $1.7 billion in senior bonds is affected by the action.
In April, STMicroelectronics said it would pay NXP $1.55 billion for an 80 percent stake in the joint venture.
Moody's said the joint venture has strategic logic but said it sees "significant challenges" to achieving the full extent of its expected revenue growth and cost benefits.
In addition, Moody's noted that the company's current cost-saving measures are being nearly offset by the impact of the weakening U.S. dollar.
Moody's noted that key credit metrics are expected to remain solid through the transition. The ratings service said STMicroelectronics' business position and customer relationships are also strong.
STMicroelectronics' shares gained 24 cents, or 2.3 percent, to $10.98 in afternoon trading. The stock has traded between $9.88 and $20.17 during the past 52 weeks.
Terms & Conditions
RSS Headlines
Fool UK