Microchip Technology offers $2 billion of 10-, 20-year convertibles

By Stephanie N. Rotondo

Seattle, Feb. 8 – Microchip Technology Inc. plans to raise $2 billion through a Rule 144A offering of two series of new convertible notes, the company said in a press release on Wednesday.

The company will offer $1.5 billion of convertible senior subordinated notes due 2027, which are talked at a 1.625% to 2.125% yield and an initial conversion premium of 37.5% to 42.5%.

Additionally, another $500 million of convertible junior subordinated notes due 2037 will be sold, with yield talk between 2.2% and 2.75% and a conversion premium of 37.5% to 42.5%.

Pricing is expected after Thursday’s close.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC and BofA Merrill Lynch are the active bookrunners on both deals. BMO, HSBC and U.S. Bank are the passive bookrunners on both transactions.

Both offerings will include a 15% over-allotment option.

The 10-year paper has warrant coverage of 0.5x. The issue is not putable and is non-callable for life.

As for the 20-year maturity, it also has 0.5x warrant coverage, contains no puts and is non-callable for life.

The company will have an option to defer interest payments on the 20-year convertibles for up to five years, under certain circumstances.

Both issues offer dividend and takeover protection.

Approximately $1.5 billion of the proceeds will be used to reduce borrowings under an amended credit facility. The company also plans to use up to $450 million to redeem its 2.125% junior subordinated convertible debentures due 2037 through privately negotiated transactions.

Such a redemption will be done with cash for the principal amount, plus stock to cover any conversion value. The redemption would also include a cash premium payment.

Any remaining proceeds will be used for general corporate purposes.

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

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