MagnaChip Semiconductor Corp.

Furthermore, we believe MagnaChip's performance will not be as severely hit by the COVID-19 pandemic as many companies in other industries. The smartphone industry continues to see a push by mobile phone makers toward use of OLED panels from LCD (liquid crystal display) panels. The trend is the force behind MagnaChip's robust performance in the first quarter of 2020 despite production disruptions and soft demand from key Chinese and Korean markets. The positive outlook on MagnaChip reflects our expectation that the company will improve its financial metrics over the next 12-24 months, primarily by using its cash proceeds from the asset disposal to lower its leverage. We may raise the rating on MagnaChip if the asset sale is completed and

...Asset disposal could significantly lower debt leverage if the proceeds are used to pay down debt. MagnaChip Semiconductor Corp. announced on March 31, 2020, that it has agreed to sell its foundry business and the factory in Cheongju (Fab 4) in South Korea to a consortium led by private equity firms Alchemist Capital Partners Korea Co. Ltd. and Credian Partners Inc. The sale is likely to rake in net cash proceeds (after tax obligations and other charges of about 15%) of US$280 million-US$300 million. These funds, combined with a cash balance of US$157 million as of March 31, 2020, exceed MagnaChip's current reported borrowings of about US$308 million. The sale will also result in transfer of severance liabilities of about US$90 million from MagnaChip's books. Based on these developments, we expect MagnaChip's debt-to-EBITDA ratio to improve to 3.0x-4.0x over the next 12-24 months, compared with 6.5x in 2019. However, this improvement is subject to the completion of the asset sale as planned....

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