8-KMaterial AgreementsFinancial EventsShareholder Matters+2

WESTERN DIGITAL CORP 8-K Report, Material Agreement (Feb 13, 2018)

Filed February 13, 2018For Securities:WDC

Summary

Western Digital Corporation (WDC) filed an 8-K on February 13, 2018, to report on significant financing activities and modifications to its existing debt structure. The company announced the closing of its offerings for $2.3 billion in 4.750% senior notes due 2026 and $1.0 billion in 1.50% convertible senior notes due 2024. These new debt issuances are governed by new indentures which include restrictive covenants for Western Digital and its subsidiaries concerning asset sales, mergers, liens, and incurring additional debt, although these covenants have limitations and exceptions. Furthermore, the filing details WDC's successful tender offer for its outstanding 10.500% senior unsecured notes due 2024. Following the acquisition of requisite consents, the company entered into a Second Supplemental Indenture. This amendment significantly alters the terms of the 2024 notes by eliminating substantially all restrictive covenants and certain events of default. These actions indicate a strategic move by Western Digital to reshape its debt profile and potentially gain more financial flexibility.

Key Highlights

  • 1Western Digital closed offerings of $2.3 billion in 4.750% senior notes due 2026 and $1.0 billion in 1.50% convertible senior notes due 2024.
  • 2The new notes were issued under separate indentures that impose restrictive covenants on Western Digital and its subsidiaries.
  • 3These covenants limit activities such as consolidation, mergers, asset sales, creating liens, and incurring new debt.
  • 4Western Digital successfully completed a tender offer for all its outstanding 10.500% senior unsecured notes due 2024.
  • 5A Second Supplemental Indenture was entered into for the 2024 notes, eliminating substantially all restrictive covenants and certain events of default.
  • 6The company issued press releases on February 13, 2018, announcing the closing of the notes offerings and the early results of the tender offer.

Frequently Asked Questions

Western Digital has issued a total of $3.3 billion in new debt, comprising $2.3 billion in 4.750% senior notes due 2026 and $1.0 billion in 1.50% convertible senior notes due 2024.

The new indentures for the 2026 Notes and 2024 Convertible Notes contain restrictive covenants that could limit Western Digital's ability to engage in certain actions such as consolidating, merging, selling substantial assets, or incurring significant additional debt. However, these covenants are subject to limitations and exceptions.

Western Digital completed a tender offer for all of its outstanding 10.500% senior unsecured notes due 2024. Following the offer, the company entered into a Second Supplemental Indenture to remove substantially all restrictive covenants and certain events of default associated with these notes, providing greater financial flexibility for this specific debt.

The issuance of new notes and the modification of existing ones suggest a strategic effort by Western Digital to refinance its debt, potentially at more favorable interest rates or terms, and to streamline its debt obligations by reducing restrictive covenants. This could indicate a move to enhance financial flexibility and optimize its capital structure.