S&P upgrades Sensata but warns on debt

SENSATA TECHNOLOGIES BOUGHT BACK $168 million in corporate bonds last week that were selling at a fraction of their face value.
Posted 4/9/09

ATTLEBORO – A Standard & Poor’s analyst has upgraded his rating on Sensata Technologies, but warned about risks from the company’s high level of debt and its exposure to turmoil in the residential housing and automotive industries.

The upgrade came after Attleboro-based Sensata paid cash to buy back $168 million in corporate bonds last week, The Sun Chronicle reported.

The debt repurchase led Standard & Poor’s to label Sensata as in “default” because it bought back the bonds for less than their par value, which the ratings agency terms a “distressed exchange,” the paper said. S&P said a total of 14 corporate bond issuers defaulted worldwide last week, the highest weekly number so far this year, according to Reuters.

Dan Picciotto, a credit analyst with S&P, expressed optimism about the company’s geographic diversification, as well as its profits from operations. But he noted that those positives were muted by the debt the company carries.

A spokeswoman for Sensata, which makes sensors and controls, told The Sun Chronicle the company has a “strong cash position” and was not considering bankruptcy. Sensata Technologies was spun off from Texas Instruments in April 2006 and has its 438,000-square-foot U.S. headquarters in Attleboro.

Jeff Cote, Sensata’s chief financial officer, said the company decided to buy back the bonds because they were trading far below their face value, allowing the company to reduce its debt load at a reduced cost.

In 2008, Sensata had $1.42 billion in sales but finished the year with a loss of $134.48 million, according to regulatory filings. Those results were an improvement over the prior year, however, when the company reported a loss of $252.51 million on sales of $1.40 billion.

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