Microsemi launches $800 million term loan B at Libor plus 425-450 bps

By Sara Rosenberg

New York, Sept. 27 - Microsemi Corp. launched its $800 million senior term loan B due Feb. 2, 2018 on Tuesday morning with price talk of Libor plus 425 basis points to 450 bps with a 1.25% Libor floor and an original issue discount of 97 to 98, according to a market source.

The loan includes 101 soft call protection for one year, the source said.

Commitments are due on Oct. 11.

Essentially, the debt is comprised of the company's existing $375 million term loan B that is being amended, restated and extended and $425 million of new term loan B borrowings.

Pricing on the existing B loan is Libor plus 300 bps with a 1% Libor floor, and it was sold at par a few months ago. It includes 101 soft call protection for one year.

Morgan Stanley Senior Funding Inc. is the lead arranger and bookrunner on the deal.

Proceeds will be used to help fund the acquisition of Zarlink Semiconductor Inc. for C$3.98 in cash per share and about C$1.6 in cash per 6% unsecured subordinated convertible debenture.

The total transaction value is roughly $525 million, net of Zarlink's cash, which is currently $107 million.

The acquisition is expected to be $0.24 to $0.26 accretive to non-GAAP earnings per share in the company's first full fiscal year ending 2012.

A tender offer for Zarlink's shares and debentures expires on Oct. 12.

Closing is subject to customary conditions, including the tender of 66 2/3% of the outstanding shares.

Debt to EBITDA will be around 3.0 times, but the company previously said that it expects leverage to trend down relatively quickly to 2.0 times to 2.5 times.

Microsemi is an Aliso Viejo, Calif.-based provider of semiconductor services. Zarlink is an Ottawa, Canada-based designer of mixed-signal semiconductor products for communications and medical applications.

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