STATS ChipPAC’s creditworthiness under threat from risky JCET takeover bid

JCET is unlikely to benefit from extraordinary government support.

STATS ChipPAC’s creditworthiness is at risk because of Jiangsu Changjiang Electronics Technology (JCET)’s takeover bid for the Singapore-based outsourced semiconductor assembly and test services company based in

Singapore.

Standard & Poor's Ratings Services that the uncompleted takeover bid has negative implications for STATS ChipPAC’s long-term credit rating.

"We anticipate downward rating pressure once the transaction is complete  because STATS ChipPAC would be less likely to benefit from extraordinary  government support after the exit of Temasek Holdings (Private) Limited. A
weakening of JCET's group credit profile or deterioration in STATS ChipPAC's  stand-alone credit profile following the transaction could also be negative  rating factors, in our view," said Standard & Poor's credit analyst Katsuyuki Nakai.

The rating on STATS ChipPAC could be under further pressure if JCET's group  credit profile under the new group structure is weaker than STATS ChipPAC's 'bb' stand-alone credit profile.

“We attribute STATS ChipPAC's weaker financial performance over the past six to  12 months to high capital expenditure for a new factory in Korea and a shift  in demand from high-end smartphones toward low-end smartphones. We estimate  that the company's ratio of funds from operations to debt fell to 27%-28% for  the 12 months ended Dec. 31, 2014, from 36% in the previous year,” Nakai added.