Microchip amends credit facility, plans paydown via new convertibles

By Marisa Wong

Morgantown, W.Va., Feb. 8 – Microchip Technology Inc. entered into a second amendment to its amended and restated credit agreement with JPMorgan Chase Bank, NA as administrative agent on Wednesday, according to an 8-K filing with the Securities and Exchange Commission.

The amendment, among other things, grants a security interest by the company and the subsidiary guarantors in substantially all of their personal property to secure the obligations under the credit agreement.

The amendment also increases the maximum total leverage ratio to 5.00 to 1.00 from 4.50 to 1.00 and permits the company, in connection with acquisitions, to increase the maximum ratio permitted to 5.50 to 1.00 for a period of four consecutive fiscal quarters, with a step down to 5.25 to 1.00 for a period of three consecutive fiscal quarters. The company may only use this increase option once during the term of the credit agreement.

In addition, the maximum senior leverage ratio was increased to 3.50 to 1.00 from 3.00 to 1.00.

The amendment modifies the existing increase option, permitting the company to arrange additional commitments – in the form of revolving or term loans – with existing lenders or new lenders up to an amount such that, after giving effect to the increase, the senior leverage ratio is less than or equal to 2.50 to 1.00.

The amendment also permits the prepayment or repurchase of a portion of the company’s 2.125% junior subordinated convertible debentures due 2037 with proceeds from the issuance of new convertible junior subordinated notes due 2037.

The company announced on Wednesday that it plans to issue $500 million of convertible junior subordinated notes due 2037 along with $1.5 billion of convertible senior subordinated notes due 2027.

The company said it intends to use about $1.5 billion of net proceeds from the new notes to reduce borrowings under the amended credit facility.

Microchip Technology is a Chandler, Ariz.-based manufacturer of microcontroller, memory and analog semiconductors.

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