Summary
Microchip Technology Incorporated (MCHP) announced on August 18, 2011, the execution of a new Credit Agreement on August 12, 2011, establishing a $750 million revolving credit facility. This facility, with a maturity date of August 12, 2016, provides the company with significant financial flexibility for working capital and general corporate purposes. The agreement also includes an option to increase the facility by an additional $250 million, demonstrating a proactive approach to managing its capital structure. This new credit facility offers competitive interest rate options, including base rate or adjusted LIBOR rate plus specified spreads, which will be determined by the company's consolidated leverage ratio. The structure ensures that borrowing costs can adjust based on the company's financial health. The agreement is secured by equity interests in certain subsidiaries and includes customary covenants and events of default, aimed at protecting lenders while allowing the company operational freedom within defined parameters.
Key Highlights
- 1MCHP secured a $750 million revolving credit facility maturing in August 2016.
- 2The facility includes a $100 million foreign currency sublimit and other specialized sublimits for letters of credit and swingline loans.
- 3The company has the option to increase the facility by up to $250 million in additional commitments (revolving or term loans).
- 4Proceeds can be used for working capital and general corporate purposes, indicating flexibility for operational needs.
- 5Interest rates are based on either a base rate or adjusted LIBOR, with spreads tied to the company's consolidated leverage ratio.
- 6The agreement is supported by subsidiary guarantees and pledges of equity in material subsidiaries.
- 7Customary affirmative and negative covenants, including financial ratio maintenance (leverage and interest coverage), are in place.