Microchip Technology Announces Offerings of Senior Secured Notes and Senior Notes

Rhea-AI Summary

Microchip Technology (NASDAQ: MCHP) announced the offering of $1.0 billion in Senior Secured Notes and $1.2 billion in Senior Notes. The proceeds will repay existing loans, finance cash exchanges for convertible notes totaling approximately $1.6 billion, and potentially support general corporate purposes. Both notes are guaranteed by certain subsidiaries and secured by collateral. The offerings are targeted at qualified institutional buyers and not registered under the Securities Act. Forward-looking statements highlight potential risks, including market conditions and the impact of COVID-19.

Positive

• Offering of $1.0 billion in Senior Secured Notes and $1.2 billion in Senior Notes indicates strong financing strategy.
• Proceeds will be utilized to repay existing debts, potentially improving financial stability.
• Expected cash exchanges for convertible notes aim to streamline debt management.

Negative

• Completion of the proposed offerings is uncertain, which may affect capital structure.
• Potential risks include market conditions, COVID-19 impact, and operating expense control.

CHANDLER, Ariz., May 26, 2020 (GLOBE NEWSWIRE) -- Microchip Technology Incorporated (NASDAQ: MCHP) (“Microchip,” “we” or “our”) announced today that it has commenced offerings of $1.0 billion in aggregate principal amount of senior secured notes (the “Senior Secured Notes”) and $1.2 billion in aggregate principal amount of senior notes (the “Senior Notes” and, together with the Senior Secured Notes, the “Notes”). Microchip intends to use the net proceeds from offering of the Senior Secured Notes to repay in full all amounts outstanding under its senior secured bridge loan facility and to use the remainder of such net proceeds, together with the net proceeds from the offering of Senior Notes and cash on hand, to finance the cash portion of the consideration it will deliver in connection with exchanges of its outstanding 1.625% Convertible Senior Subordinated Notes due 2025 (the “2025 Notes”) and its outstanding 1.625% Convertible Senior Subordinated Notes due 2027 (the “2027 Notes”), for cash, which Microchip anticipates will be up to approximately $1.6 billion in the aggregate, representing the principal amount exchanged and accrued and unpaid interest thereon, and shares of Microchip’s common stock, representing the conversion value in excess of the principal amount of such notes, in privately negotiated transactions with certain holders of such 2025 Notes and 2027 Notes. Any remaining net proceeds from the offering of the Notes, if any, will be used for general corporate purposes, which may include the repayment of a portion of the amounts outstanding under Microchip’s revolving credit facility. There can be no assurance that the proposed offerings of the Notes will be completed or that any of the exchanges of 2025 Notes or 2027 Notes will be consummated.  The closing of the offering of the Senior Secured Notes is not contingent upon the closing of the offering of Senior Notes and the closing of the Senior Notes is not contingent upon the closing of the offering of the Senior Secured Notes. 

Both the Senior Secured Notes and the Senior Notes will be guaranteed on a joint and several basis by certain of Microchip’s subsidiaries (the “guarantors”) that guarantee obligations under Microchip’s term loan facility and revolving credit facility (collectively, the “senior credit facilities”) as well as our outstanding 3.922% Senior Secured Notes due 2021 and 4.333% Senior Secured Notes due 2023 (collectively, the “existing secured notes”).

The Senior Secured Notes and the related guarantees will be secured on a pari passu first lien basis with our senior credit facilities and our existing secured notes by the collateral that secures such obligations. The Senior Notes and the related guarantees will not be secured by any assets or properties of Microchip or the guarantors.

The Notes will be sold only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States only to non-U.S. persons in accordance with Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

This press release shall not constitute an offer to sell or a solicitation of an offer to purchase any of these Notes, and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

Cautionary Statement:

The statements contained in this press release relating to the proposed offerings including the expected use of proceeds are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These statements involve risks and uncertainties that could cause actual results to differ materially, including, but not limited to: uncertainties related to equity and debt market conditions; the impact of the COVID-19 virus on the economy, our business and the business of our customers and suppliers; our balance of cash and investments and the level of cash flow from our business; our available borrowings under our credit agreement; our ability to control the level of operating expenses relative to our level of revenues; the costs and outcome of any current or future litigation, audit or investigation and general economic, industry or political conditions in the United States or internationally. For a detailed discussion of these and other risk factors, please refer to Microchip’s filings on Forms 10-K and 10-Q.  You can obtain copies of Forms 10-K and 10-Q and other relevant documents for free at Microchip’s website (www.microchip.com) or the SEC’s website (www.sec.gov) or from commercial document retrieval services. 

You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made.  Microchip does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after the date of this press release, or to reflect the occurrence of unanticipated events.

The Microchip name and logo are registered trademarks of Microchip Technology Incorporated in the USA and other countries.  All other trademarks mentioned herein are the property of their respective companies.

INVESTOR RELATIONS CONTACT:
J. Eric Bjornholt – CFO      (480) 792-7804

FAQ

What is the purpose of Microchip's recent $1.0 billion and $1.2 billion offerings?

The offerings aim to repay existing loans and finance cash exchanges for convertible notes.

What risks are associated with Microchip's recent debt offerings?

Risks include uncertainties related to market conditions and the economic impact of COVID-19.

Who are the intended buyers for Microchip's Senior Secured and Senior Notes?

The notes are offered only to qualified institutional buyers.

How will the proceeds from Microchip's note offerings be used?

Proceeds will repay debt, finance cash portions of convertible notes, and may support general corporate purposes.