TECHNOLOGY: Infineon Settles Long-Standing Qimonda Dispute; Not A Spread Mover

NR/BBB+                              EUR Spreads Mixed & Muted

Infineon’s long-standing dispute with Qimonda’s administrator has concluded in a settlement against Infineon with a EUR ~0.5bn impact on earnings and cash flow though the impact on leverage looks minimal. 

• Infineon settles a legal dispute with Qimonda's insolvency administrator, concluding a lawsuit that started in 2010, which involved a claim of EUR 3.4bn plus interest.
• Infineon carved out its memory business and transferred it to Qimonda in 2006 before Qimonda filed for insolvency at the Munich Local Court in 2009 and with Qimonda's administrator suing Infineon in 2010 for EUR 3.35bn, arguing that the memory operations were transferred at an inflated price.
• The settlement involves a payment of EUR 753.5mn, which is EUR 800mn minus set-offs from previous agreements while Infineon appears to have set aside EUR 212mn in provisions for the case since Q323 meaning that the payment will negatively impact Infineon's earnings and cash flow from discontinued operations with payment from existing reserves. The settlement ends all legal claims.
• As of Q3, Infineon had gross cash of EUR 2.7bn with net debt of EUR 3.4bn while guiding for EUR 1.6bn in adj-FCF this year but zero reported FCF. They sit well inside their leverage target with gross leverage of 1.2x at Q3 (vs. <2x target) with a EUR ~0.5bn impact equating to ~0.1x.