JWCA advises Microchip Technology on its $2.3 billion convertible bond offering

february 2017 | read press release

Transaction Background

J. Wood Capital Advisors was hired to assist in execution of its Credit Facility re-structuring and Convertible re-financing, given:

• Leverage limitations and financing costs associated with Revolving Credit Facility
• Potential of early conversions of the Company’s existing Junior Subordinated Convertible due 2037
• Dilution of the Company’s existing Junior Subordinated Convertible due 2037

Results

Microchip priced both tranches of the new Convertible issuance at Company-friendly terms:

• 10-year:  Priced at the low end of coupon range and high end of conversion premium range; upsized to $1.8 billion from $1.5 billion
• 20-year:  Priced at the low end of the coupon range and midpoint of the conversion premium range
• Raised the conversion price from $23.86 to a weighted average of $100.76

The Company used ~$1.7 billion of proceeds from the convertible issuance to pay down its existing Credit Facility, thereby replacing a floating rate with a fixed rate in a rising interest rate environment.

The Company also increased the total leverage ratio in their credit facility from 4.5x to 5.0x.

The Company exchanged $431mm of the outstanding 2037 Junior Subordinated Convertible Notes, by paying the par amount in cash, with upside paid in shares.