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JWCA advises Microchip on its $1.25 billion convertible senior notes offering

may 2024 | read press release

Transaction Background

Microchip Technology Incorporated (“Microchip” or the “Company”) successfully raised $1,250mm (inclusive of greenshoe) in the convertible market at attractive terms (0.75% coupon and 27.5% conversion premium)

Microchip’s objectives included:

  • Refinance more expensive outstanding debt to lower cash interest expense to drive EPS accretion

  • Offer a one-time discrete put option to receive a lower coupon on financing (sub 1%)

  • Protect against future equity dilution through a derivative overlay

JWCA provided extensive analysis on deal structuring and related items, including:

  • Convertible and derivative overlay structuring

  • Syndicate structure and precedent data

  • Convertible and capped call documentation to ensure maximum value and future efficiency/flexibility for the company

JWCA designed and ran a capped call auction process to achieve competitive terms

JWCA provided advice, support and analysis throughout the execution process

Results

Microchip’s convertible transaction was very well received by investors:

  • Despite the convertible market seeing more than $16bn of issuance in the weeks prior to Microchip’s transaction, the Company was able to attract significant demand leading to a multiple times oversubscribed book which priced at the mid-point of the marketed range

  • Microchip’s stock traded down only ~3% on a day when the semiconductor index was down ~2% (while precedent issuers traded down ~5 – 10% on pricing day)

  • JWCA supported the management team on the entirety of the offering providing execution advice and ensuring a high-quality execution

JWCA designed a custom put structure that helped save the Company ~$9mm a year in coupon expense

Capped call documentation and auction process produced meaningful savings for Microchip, while maximizing flexibility for the Company

This is JWCA’s fourth advisory assignment for the Company after advising Microchip on capital structure transactions in February 2015, February 2017 and June 2017