Summary
Microchip Technology Inc. (MCHP) filed this 8-K to disclose the details of a significant debt issuance totaling $2 billion. This issuance, comprised of $1 billion in 3.922% Senior Secured Notes due 2021 and $1 billion in 4.333% Senior Secured Notes due 2023, was conducted under Rule 144A and Regulation S, targeting qualified institutional buyers and non-U.S. persons, respectively. The proceeds from these notes, along with other financing sources including borrowings from a new term loan and existing revolving credit facility, were utilized to finance the previously announced acquisition of Microsemi Corporation. The debt is secured by substantially all tangible and intangible assets of Microchip and its guarantors, on a pari passu basis with its senior credit facilities. This filing details the terms of the Purchase Agreement and the Indenture governing the notes. Key aspects include the maturity dates, interest rates, semi-annual interest payments, and optional redemption provisions. The notes also feature a change of control provision requiring a repurchase at 101% of the principal amount under specified circumstances. Covenants are in place restricting asset sales, liens, and mergers, subject to certain exceptions. Events of default are outlined, including payment failures, covenant breaches, material defaults on other indebtedness, and bankruptcy events, which can lead to accelerated repayment.
Key Highlights
- 1Microchip Technology Inc. issued $1 billion in 3.922% Senior Secured Notes due 2021 and $1 billion in 4.333% Senior Secured Notes due 2023, totaling $2 billion in aggregate principal amount.
- 2The debt issuance was used to finance the previously announced acquisition of Microsemi Corporation, repay Microsemi's existing indebtedness, and cover related fees and expenses.
- 3The Notes are secured on a pari passu first lien basis with the Senior Credit Facilities, backed by substantially all tangible and intangible assets of Microchip and its subsidiary guarantors.
- 4The 2021 Notes mature on June 1, 2021, and the 2023 Notes mature on June 1, 2023, with semi-annual interest payments commencing December 1, 2018.
- 5The Indenture includes covenants restricting the company's ability to incur liens, enter into sale-leaseback transactions, and dispose of collateral.
- 6A change of control triggering event will require Microchip to offer to repurchase the Notes at 101% of the principal amount.
- 7The filing outlines various events of default, including payment failures, covenant breaches, material defaults on other debt exceeding $100 million, and bankruptcy.