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.