OREANDA-NEWS. S&P Global Ratings today said it affirmed its 'BB+' corporate credit rating on Singapore-based Broadcom Ltd. and revised the outlook to positive from stable.

We also affirmed the 'BBB' issue-level rating on the company's secured debt. The recovery rating is '1', indicating our expectation for very high recovery (90% to 100%) in the event of a payment default.

At the same time, we affirmed the 'BB+' issue-level rating on the legacy Broadcom Corp. unsecured notes. The recovery rating is '3', indicating our expectation for meaningful recovery (50% to 70%; upper end of the range) in the event of a payment default.

Additionally, we assigned our 'BBB' issue-level rating to the company's new term loan B-3. The recovery rating is '1', indicating our expectation for very high recovery (90% to 100%) in the event of a payment default.

"The outlook revision is based on the company's progress to date on the integration of Broadcom Corp. by maintaining gross margins relatively unchanged and applying a significant portion of its discretionary cash flow toward debt reduction," said S&P Global Ratings credit analyst Jenny Chang.

In addition to approximately $560 million of term loan repayment in the second quarter ending April 30, 2016, we expect the company to repay about another $1 billion by the end of third fiscal quarter resulting in S&P Global Ratings' pro forma adjusted leverage in the low-2x area, ahead of our previous forecast. Our adjusted leverage is net of surplus cash, which we calculate as 75% of reported cash and investments.

The positive outlook reflects ample debt capacity under our assessment of Broadcom's credit profile and our expectation that its continuing growth prospects and strong cash generating ability provides substantial financial flexibility for acquisitions and shareholder returns, which would support a higher corporate credit rating over the coming year.