Intel Corporation $1 Bil 4.9% Note Rated ‘A+’ By Fitch

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Intel’s $1 billion senior notes issuance in Taiwan got an A+ rating from Fitch, while the chip makers long and short-term Issuer Default has been rated as ‘A+/F1.’ The overall rating is given as Stable.


Intel’s operating profile strong

Prior to issuing this $1 billion of 4.9% senior notes due August 11, 2045, Intel issued a $7 billion senior notes offering on July 22, 2015. The chipmaker will utilize the net proceeds to pay for the $16.7 billion acquisition of Altera Corp. The deal is expected to close by the end of 2015.

Senior notes issued from Intel will rank pari pasu with Intel’s senior unsecured debt and is callable annually after two years. Additionally, the chipmaker could redeem the senior notes in case of any change in U.S. tax policies.

Bearers of these senior notes will require the company to pay off two series of senior notes from the $7 billion senior notes sales totaling $4.25 billion at 101% of principal along with the accrued interest if the Altera acquisition does not close before December 31, 2016.

Fitch noted that Intel’s operating profile will continue to grow, and credit protection meets the requirements for the current rating, even after incremental debt issuance to fund the Altera acquisition.

Fitch is expecting more than $5 billion in annual free cash flow over the next few quarters prior to the acquisition that could bring down the amount of new debt to fund the Altera purchase price.

Altera to push growth for Intel

Intel is a leader in manufacturing chips, and its x86 processor architecture is also the premier platform for data centers/servers, offering the company a significant advantage in the enterprise and cloud-computing space. Intel is expected to continue its long-term secular growth in digitization and computer adoption worldwide along with the greater penetration of microprocessors in areas beyond the traditional computing.

In the coming years, Altera will be a significant contributor in the data center and Internet of Things markets. Altera is a dominant force in the field of programmable logic devices with a 39% share in the $5 billion PLD market. Intel is expecting the integration of its processors with Altera’s PLDs to fuel growth in the data center, and grab share from the application-specific solutions providers in the fast growing IoT market.

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As of around 1 pm EDT Friday, Intel shares were down 0.24% at $28.84, and year to date the stock is down over 21%.

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