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Fitch Ratings-Taipei/Seoul/Singapore-02 July 2009: Fitch Ratings has today downgraded AU Optronics Corporation's (AUO) Long-term foreign and local currency Issuer Default Ratings (IDR) to 'B+' from 'BB-', and its National Long-term Rating to 'BBB-(twn)' from 'BBB(twn)'. The Outlook remains Negative. The rating actions reflect the agency's view that the company's projected credit metrics for 2009 will not be comparable to its peers in the 'BB' category.
Fitch expects AUO's major credit measurements, such as profitability and financial leverage, to weaken in 2009 in light of the global economic recession. Pricing pressures of its TFT-LCD panel products and weakened demand from downstream electronic product vendors will lead to depressed sales for the year. Following a 62.9% yoy revenue decline in Q109, whole year sales are likely to plunge significantly more than 2008's 11.7% decline; this is despite a likely slowdown in the decline of sales from Q209 to Q409. With decreased selling prices and low loading rates, AUO's EBITDA margin in 2009 is likely to be less than half of the 23%-30% level achieved over the past three years.
Fitch notes that further rating downgrades could occur if operating and financial data from ongoing quarterly results leads Fitch to expect that AUO's net adjusted debt/EBITDAR leverage ratio could exceed 5.0x on a sustained annual basis, if the company registers negative quarterly EBITDA margins for two consecutive quarters, or if AUO's last-twelve-month FFO interest coverage falls below 3.0x. Moreover, a downgrade could occur if bond covenants are breached without satisfactory remedy, leading to narrower funding options for the company. Conversely, positive rating actions may be triggered if AUO's net adjusted leverage falls below 3.0x on a sustained annual basis, or if evidence emerges of a sustainable pick-up in flat panel pricing and demand which is likely to drive an improvement in profitability and credit profile. The agency will closely monitor the company's quarterly operating performance and credit metrics in light of these rating action guidelines.
AUO holds adequate liquidity as its cash balance at end-March 2009 covered 128% of its debt due within a year.
Contacts: Kevin Chang, Taipei, +886 2 8175 7609/
kevin.chang@fitchratings.com; Jongwan Kim, Seoul, +82 2 3278 8371/
jongwan.kim@fitchratings.com.
Media Relations: Lisa Lim, Singapore, Tel: +65 6796 7214,
Email:
lisa.lim@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. AU Optronics did not participate in the rating process other than through the medium of its public disclosure.
