S&P starts downgrade review on MEMC Electronic Materials

Dec 13, 2011 – S&P today put on downgrade review the BB corporate credit and senior unsecured debt ratings on US silicon wafers maker MEMC Electronic Materials Inc (NYSE:WFR).

The agency also revised down the company's business risk profile to "weak" from "fair" and affirmed the 4 recovery rating.

The placement of the ratings on credit watch with "negative" implications and the revision of the company's business risk profile were largely triggered by the tough solar industry conditions, S&P said.

Those challenges include declining funding sources for the sector, changes to the solar energy regulations and possible political reversal, the service added.

In addition to its direct involvement in the silicon wafers market, MEMC is exposed to the broader solar market via its Solar Energy segment (SunEdison), which designs, develops and installs solar energy systems.

The decline in wafer prices by 40-50% has led to a 10% annual fall in the company's third-quarter 2011 revenues in the solar material segment. Besides, the excess solar panel supply would lead to persistent single-digit price reduction next year, under company estimates, which will negatively affect MEMC's revenues, though double-digit drop is unlikely.

Earlier this month the company announced a slew of restructuring steps it was taking to address the solar materials segment adversity. The restructuring would likely result in a USD 700 million (EUR 531m) charge the company would take in the final quarter of 2011, of which USD 520 million is expected to be non-cash.

In resolving the "negative" listing that will probably occur by end-March 2012, the agency will examine the restructuring activities, the financial outlook for the company following changes in its cost structure and business reorganisation as well as the effect on its credit profile of continued solar market challenges.

(USD 1.00 = EUR 0.758)

Rating agency website: www.standardandpoors.com

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