8-KRegulation FD

TE Connectivity plc 8-K Report, Regulation FD Disclosure (Jan 16, 2009)

Filed January 16, 2009For Securities:TEL

Summary

TE Connectivity plc (TEL), formerly Tyco Electronics Ltd., announced a significant development regarding its subsidiary, M/A-COM, Inc. On January 15, 2009, M/A-COM received official notification from the New York State Office for Technology (OFT) terminating the Master Agreement for the construction, operation, and maintenance of the New York State Statewide Wireless Network. This termination was designated as "for cause." The OFT has also issued a demand for $50 million under a related standby letter of credit and has indicated the potential to seek an additional $50 million from the same instrument. Tyco Electronics has expressed disappointment with the termination, asserting that M/A-COM fulfilled its contractual obligations and delivered a high-quality system. The company believes the State's current priorities may have shifted away from the project and plans to take all necessary actions to safeguard its rights under the contract.

Key Highlights

  • 1M/A-COM, a subsidiary of TE Connectivity (formerly Tyco Electronics), had its contract for the New York State Statewide Wireless Network terminated "for cause" by the State's Office for Technology (OFT).
  • 2The OFT has demanded $50 million under a standby letter of credit related to the terminated contract.
  • 3The OFT may seek an additional $50 million under the same standby letter of credit.
  • 4TE Connectivity (Tyco Electronics) disputes the "for cause" termination, stating M/A-COM fulfilled its obligations and delivered a state-of-the-art system.
  • 5The company suggests the termination may be due to the State's changing priorities regarding the network's construction.
  • 6TE Connectivity plans to vigorously defend its rights and explore all available legal avenues.
  • 7This event represents a material contractual dispute and potential financial impact for the company.

Frequently Asked Questions

The main event is the termination 'for cause' of the Master Agreement between M/A-COM (a subsidiary of TE Connectivity) and the New York State Office for Technology (OFT) for the Statewide Wireless Network. This termination is accompanied by a demand for $50 million under a standby letter of credit and the possibility of a further demand for $50 million.

TE Connectivity (Tyco Electronics) disagrees with the 'for cause' termination, asserting that M/A-COM met its contractual requirements and delivered a high-quality system. The company believes the State's decision might be influenced by a shift in its own priorities for the project.

The immediate financial impact is the OFT's demand for $50 million under a standby letter of credit, with the potential for an additional $50 million draw. The total potential exposure is $100 million, plus any further costs associated with legal disputes.

TE Connectivity intends to protect the company's rights under the contract and will take all necessary steps to do so. This implies a willingness to engage in legal proceedings to contest the termination and defend against the claims.