Research: Rating Action: Moody’s Confirms Intel’s A1 Senior Unsecured Rating; outlook changed to negative

New York, August 01, 2022 — Moody’s Investors Service (“Moody’s”) has affirmed the A1 senior unsecured credit ratings and Prime-1 commercial paper rating of Intel Corporation (“Intel”). In addition, Moody’s also affirmed the senior unsecured credit rating of Intel’s wholly-owned subsidiary, Altera Corporation (“Altera”), whose debt is guaranteed by Intel. The rating outlook for Intel and Altera has changed from stable to negative.

The change in rating outlook to negative reflects the company’s “continued challenges to consistently execute its manufacturing and product development in the face of a weakened macroeconomic environment, strong competitive challenges and supply chain disruptions.” ‘supply,” said Richard Lane of Moody’s. As a result, Intel’s revenue was 15% below Moody’s expectations in the second quarter and Moody’s expects full-year revenue to be at least 12% below our expectations, with a greater profitability gap. significant. The company’s liquidity will remain very robust with $27 billion in cash and short-term investments. Leverage will remain modest, but will weaken due to reduced profitability and lower free cash flow after capital expenditures, even after taking into account pending access to chip laws of the American and European region, the details of which are still being worked out.

Statement:

..Issuer: Intel Corporation

…. Commercial paper, confirmed P-1

….A1 Confirmed Senior Regular Unsecured Bond/Debenture

..Issuer: Oregon State Business Development Commission

….LT Senior Unsecured Revenue Bonds, Confirmed A1

…. Senior Unsecured Revenue Bonds, Confirmed A1

..Issuer: Chandler (City of) AZ, IDA

….LT Senior Unsecured Revenue Bonds, Confirmed A1

…. Senior Unsecured Revenue Bonds, Confirmed A1

..Issuer: Chandler (City of) AZ, Ind. Dev. Auth.

…. Senior Unsecured Revenue Bonds, Confirmed A1

..Issuer: Puerto Rico Ind Med&Env Poll Ctl Fac Fin Auth

…. Senior Unsecured Revenue Bonds, Confirmed A1

..Issuer: Altera Corporation

….A1 Confirmed Senior Regular Unsecured Bond/Debenture

Outlook Actions:

..Issuer: Intel Corporation

….Outlook, changed to negative from stable

..Issuer: Altera Corporation

….Outlook, changed to negative from stable

RATINGS RATIONALE

Intel’s credit profile reflects its leading position in microprocessors with approximately 80% market share, modest financial leverage and a very strong liquidity profile. The huge R&D and capital investment required to expand manufacturing process capabilities and next-generation product capability represents a constant call for capital to manufacture chips in-house. Although it also represents a significant barrier to entry, Moody’s expects competitor Advanced Micro Devices to continue to gain market share from a low but growing base over the next year. . While in-house manufacturing may provide an advantage in terms of time-to-market and chip functionality, Intel still faces the challenge of moving to smaller transistor nodes while its main competitor outsources manufacturing to the largest foundry in the world. Despite Intel’s market position and strong credit metrics, the rating is limited by the relatively high operational and technology risk associated with designing and manufacturing advanced semiconductors, and the inherent volatility of the semiconductors, as evidenced by the company’s recent results and outlook. While Moody’s expects Intel to maintain a very strong market position over the medium term, market share losses are expected to persist through 2023. A key challenge for Intel will be executing its strategy to regain leadership. in the manufacturing sector and maintain or regain market share.

Intel’s ESG Credit Impact Score is neutral to low (CIS-2). The CIS score strikes a balance between moderately negative corporate environmental risks and neutral to low governance and social risks.

As of June 2022, Intel had $27 billion in cash and short-term investments as well as $1.5 billion in long-term liquid equity securities. Intel is maintaining a $10 billion non-borrowing commercial paper program beginning in June 2022. For the first time in over a decade, in March 2021 Intel entered into a $5 billion committed revolving credit facility on five years (now a March 2027 maturity) under no borrowing in June 2022, no need to represent no material adverse change and no financial covenant. Intel has a well-laddered debt maturities stack, with the next $1.9 billion note maturing in December 2022.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

Given the negative outlook, an upgrade is unlikely in the near term. Longer term, Intel’s rating could be improved if the company manages to improve and sustain manufacturing execution at advanced process nodes, regain market share in its core PC and data centers and is delivering substantial improvements in automotive and other emerging mobile and IoT markets while maintaining strong credit metrics. Ratings could be downgraded if the company’s operating performance is unlikely to show a significant reversal over the next year; whether there is a sustained erosion of microprocessor market share over the medium term; or if there is a significant disruption to manufacturing capacity that could arise from ongoing technology transition challenges (five nodes in four years). A significant reduction in balance sheet liquidity and/or a departure from its conservative tax practices could also put pressure on the rating.

Intel Corporation, based in Santa Clara, California, is the world’s largest semiconductor company and the leading manufacturer of microprocessors. Moody’s expects Intel to generate approximately $66 billion in revenue in 2022.

The primary methodology used in these ratings was Semiconductors published in September 2021 and available at https://ratings.moodys.com/api/rmc-documents/74959. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following information, if applicable to the jurisdiction: Ancillary services, Information to be provided to the rated entity, Information to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Richard J. Lane
Senior Vice President
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer Service: 1 212 553 1653

Lenny J. Ajzenman
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer Service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer Service: 1 212 553 1653

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