TTM Technologies Inc. Senior Unsecured Notes Assigned #BB# Rating

Stocks and Financial Services Press Releases Tuesday September 12, 2017 09:18
SAN FRANCISCO--12 Sep--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) Sept. 11, 2017--S&P Global Ratings said today that it assigned its 'BB' issue-level rating and '4' recovery rating to Costa Mesa, Calif.-based TTM Technologies Inc.'s proposed $375 million senior unsecured notes. The '4' recovery rating indicates our expectation for average (30% to 50%; rounded estimate 45%) recovery in the event of payment default.

The proceeds of the notes, along with the previously announced $350 million term loan, will be used to refinance the balance of the existing term loan and pay down a portion of its U.S. asset-backed revolving credit facility.

All of our other ratings on TTM are unchanged, as we view the transaction as leverage neutral. In our view, TTM has adequate liquidity.
We anticipate coverage of uses in excess of 1.2x for the next 12 months and positive net sources in the near term, even with a 15% decline in EBITDA.

Principal Liquidity Sources A cash balance of around $247 million at July 3, 2017$303 million available under its U.S. and Chinese asset-backed revolving credit facilitiesAnnual operating cash flow in the low $300 million areaPrincipal Liquidity Uses Annual capital spending of around $135 millionMandatory debt amortization of around $4 millionCovenants: There will be no financial covenants on the new first-lien term loan.

RECOVERY ANALYSIS Key analytical factors Our simulated default scenario assumes a payment default in 2022 arising from a combination of heightened competition, inefficient research and product development outlays, and an economic slowdown that results in client attrition, lower margins, and the loss of liquidity.

We believe the company would be reorganized under a default scenario rather than liquidated. We applied a 5x multiple to an estimated distressed emergence EBITDA of $155 million to estimate gross recovery value of about $774 million.

The multiple is at the low end of the range that we use for hardware companies, which we believe is appropriate, given the industry's cyclical nature, high fragmentation, and high capital spending requirements.Simulated default assumptions Year of default: 2022EBITDA at emergence: $155 million

EBITDA multiple: 5xLIBOR at default: 2.5%
Simplified waterfall Net recovery value (after 5% administrative costs): $735 millionValuation split (obligors/nonobligors): 70%/30%Priority claims: $215 million
Value available to first-lien debt: $476 millionFirst-lien debt claims: $345 million
Recovery expectations: 90% to 100% (rounded estimate 95%)Value available to structurally senior unsecured debt: $176 million
Senior unsecured debt claims: $386 million
Recovery expectations: 30% to 50% (rounded estimate 45%)
Subordinated senior unsecured debt claims: $252 million
Recovery expectations: 0% to 10% (rounded estimate 0%)Note: All debt amounts at default include six months' accrued prepetition interest.
Collateral value equals asset pledges from obligors less priority claims plus equity pledges from nonobligors afternonobligor debt.

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