8-KSecurities & Listing

MICROCHIP TECHNOLOGY INC 8-K Report, Unregistered Securities Sale (Dec 9, 2021)

Filed December 9, 2021For Securities:MCHPMCHPP

Summary

Microchip Technology Inc. (MCHP) announced on December 9, 2021, that it entered into privately-negotiated exchange agreements to repurchase a portion of its outstanding convertible senior subordinated notes. The company will exchange approximately $96.7 million in cash and roughly 2.3 million shares of its common stock for approximately $36.6 million principal amount of the 2025 Notes, $39.7 million of the 2027 Notes, and $19.9 million of the 2037 Notes. This transaction is expected to close around December 14, 2021. This exchange is being conducted privately and is not expected to generate proceeds for Microchip; instead, it aims to reduce the outstanding principal of these convertible notes. The cash portion will be funded through existing credit facilities and cash reserves. While this action will reduce the company's debt burden associated with these notes, a significant principal amount of each series of notes will remain outstanding.

Key Highlights

  • 1Microchip is repurchasing a portion of its 1.625% Convertible Senior Subordinated Notes due 2025, 1.625% Convertible Senior Subordinated Notes due 2027, and 2.250% Convertible Junior Subordinated Notes due 2037.
  • 2The company will issue approximately 2.3 million shares of common stock and pay approximately $96.7 million in cash in exchange for approximately $96.2 million in aggregate principal amount of these notes.
  • 3The exchange transactions are expected to close on or about December 14, 2021.
  • 4Following the exchanges, significant principal amounts of each note series will remain outstanding ($34.4M of 2025 Notes, $193.0M of 2027 Notes, $10.2M of 2037 Notes).
  • 5The transactions are being conducted as private placements, exempt from registration under the Securities Act.
  • 6The cash component of the repurchase will be funded by borrowings under Microchip's credit agreement and existing cash.
  • 7No cash proceeds will be received by Microchip from these exchange transactions; the company is receiving and canceling the exchanged notes.

Frequently Asked Questions

The primary purpose is to reduce Microchip's outstanding principal amount of specific convertible senior subordinated notes by exchanging them for cash and company stock. This effectively repurchases a portion of its debt.

These transactions will reduce the company's reported debt (specifically, the principal of the exchanged convertible notes). The company will incur a cash outflow and issue new equity, which will affect its cash and equity accounts, respectively.

This means the shares are being issued directly to specific institutional investors or qualified institutional buyers who meet certain accreditation standards, without the need for a public offering registration process with the SEC. This is common for private debt exchanges.

No, a substantial aggregate principal amount of each series of convertible notes will remain outstanding after the exchange transactions are completed. This exchange only addresses a partial repurchase of the notes.