8-KMaterial AgreementsExhibits & Filings

MICROCHIP TECHNOLOGY INC 8-K Report, Material Agreement (May 18, 2018)

Filed May 18, 2018For Securities:MCHPMCHPP

Summary

Microchip Technology Inc. (MCHP) has entered into an Amended and Restated Credit Agreement, significantly enhancing its financial flexibility. This agreement establishes a new revolving loan facility totaling approximately $3.8 billion, divided into two tranches with maturity dates in February 2020 ($244.3 million) and May 2023 ($3.6 billion). A key purpose of this new facility is to finance the company's pending acquisition of Microsemi Corporation, as well as to refinance Microsemi's existing debt and cover associated fees and expenses. The facility can also be used for general corporate purposes and working capital. The credit agreement includes various interest rate options based on the company's leverage ratio, alongside customary fees. Importantly, the agreement allows for further indebtedness, including up to $5.0 billion in notes or a term loan facility, and the potential to increase the revolving credit facility. The company's obligations are secured by substantially all of its assets and guaranteed by certain subsidiaries, with covenants restricting certain activities and requiring maintenance of specific financial ratios. This expanded credit facility provides substantial resources for the Microsemi acquisition and ongoing operational needs.

Key Highlights

  • 1Entry into an Amended and Restated Credit Agreement with an approximate aggregate principal amount of $3.8 billion.
  • 2The credit facility is structured into two tranches: $244.3 million maturing in February 2020 and $3.6 billion maturing in May 2023.
  • 3Proceeds from the revolving loan facility are earmarked to finance the pending acquisition of Microsemi Corporation and refinance its existing debt.
  • 4The agreement allows for additional indebtedness of up to $5.0 billion, including senior secured or unsecured notes or a senior secured term loan.
  • 5The company can increase its revolving loan commitments, subject to lender commitments and leverage ratio compliance.
  • 6The credit facility is secured by substantially all of Microchip's assets and guaranteed by certain subsidiaries.
  • 7The agreement includes customary covenants that limit or restrict certain corporate actions and financial activities, as well as financial maintenance covenants.

Frequently Asked Questions

The primary purpose of the $3.8 billion revolving loan facility is to finance Microchip's pending acquisition of Microsemi Corporation, including the refinancing of Microsemi's existing indebtedness and associated fees and expenses. It can also be used for working capital and general corporate purposes.

The revolving loan facility is divided into two tranches: the 2020 Revolving Loans, which mature on February 4, 2020, with approximately $244.3 million in commitments, and the 2023 Revolving Loans, which mature on May 18, 2023, with approximately $3.6 billion in commitments.

Yes, the Amended and Restated Credit Agreement permits Microchip and its subsidiaries to incur additional indebtedness of up to $5.0 billion. This can be in the form of senior secured or unsecured notes or a senior secured term loan facility, among other options, subject to certain conditions.

The company's obligations are secured by substantially all of its assets, and certain subsidiaries provide guarantees. The agreement includes customary covenants that restrict the company and its subsidiaries from taking certain actions, such as incurring subsidiary debt, disposing of assets, or paying dividends, without meeting specific exceptions. It also requires the maintenance of certain financial ratios (consolidated total leverage, senior leverage, and interest coverage ratios).