01—Abstract
Summary
Summary of the 8-K filed June 24, 2022. Cited figures are marked; the original filing is the authoritative source.
KLA Corporation (KLAC) announced a significant financing and capital return strategy through its 8-K filing on June 24, 2022.
The company issued a substantial amount of senior notes, totaling $3.0 billiona, across three tranches: $1.0 billion in 4.650% Senior Notes due 2032, $1.2 billion in 4.950% Senior Notes due 2052, and $800 million in 5.250% Senior Notes due 2062. This issuance was made under a new Indenture with U.S. Bank Trust Company, National Association. The proceeds from this debt issuance are earmarked for a dual purpose.
A portion will be used to fund a concurrent tender offer to repurchase the company's outstanding 4.650% Senior Notes due 2024. The remaining proceeds, along with existing cash and/or revolving credit facility borrowings, will be directed towards a significant share repurchase program, aiming to buy back $3.0 billionb of common stock. This suggests a proactive approach by KLA Corp to optimize its capital structure and return value to shareholders.
02—Key points
Key Highlights
- KLA Corp issued $3.0 billion in new senior notes: $1.0 billion (4.650% due 2032), $1.2 billion (4.950% due 2052), and $800 million (5.250% due 2062).
- The net proceeds from the notes offering will be used to fund a concurrent tender offer for $3.0 billion of its 4.650% Senior Notes due 2024.
- The company also plans to use remaining proceeds for a share repurchase program, aiming to buy back $3.0 billion of its common stock.
- KLA entered into Accelerated Share Repurchase (ASR) agreements with Goldman Sachs & Co. LLC and Citibank N.A. to execute the $3.0 billion stock buyback.
- Initial deliveries of approximately 6.55 million shares are expected on June 24, 2022, with final settlement by the second fiscal quarter ending December 31, 2022.
- The new senior notes are unsecured and rank equally with other unsecured and unsubordinated indebtedness of KLA Corp.
- The Indenture includes covenants restricting the company's ability to incur liens, engage in sale and lease-back transactions, and dispose of substantially all assets.
03—Questions
Frequently Asked Questions
What is the primary purpose of KLA Corp issuing $3.0 billion in new senior notes?
The primary purposes are to fund a tender offer to repurchase $3.0 billion of its 4.650% Senior Notes due 2024, and to repurchase approximately $3.0 billion of its common stock through accelerated share repurchase agreements.
What are the interest rates and maturity dates of the newly issued senior notes?
The company issued $1.0 billion of 4.650% Senior Notes due 2032, $1.2 billion of 4.950% Senior Notes due 2052, and $800 million of 5.250% Senior Notes due 2062.
How will the $3.0 billion share repurchase program be executed?
KLA Corp entered into Accelerated Share Repurchase (ASR) agreements with Goldman Sachs & Co. LLC and Citibank N.A. The company made payments totaling $3.0 billion on June 24, 2022, and expects initial deliveries of shares on the same day, with final settlement occurring by the end of the second fiscal quarter ending December 31, 2022.
What are the key covenants in the new Indenture regarding KLA Corp's operations?
The Indenture contains limited covenants, primarily restricting the company and its subsidiaries from incurring liens on certain property or stock, engaging in sale and lease-back transactions on principal property, and from consolidating or disposing of substantially all of its assets without adhering to specific terms.
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