Zilog reaches agreement with bondholders on debt-for-equity swap, Chapter 11

New York, Nov. 28 - Zilog, Inc. said it reached an agreement with holders of a majority of its senior secured notes on a recapitalization under which the debt will be exchanged for equity and a new, smaller note in a prepackaged Chapter 11 filing.

The Campbell, Calif. semiconductor company described the deal as an agreement in principle with "certain key holders" who own more than 60% of the outstanding senior debt.

Under the plan, the $280 million in notes will be exchanged for equity plus a $30 million non-recourse note.

Zilog said it plans an exchange offer under which all noteholders will be offered the opportunity to exchange their bonds for stock plus a share of the $30 million non-recourse note.

The company said the exchanged will be carried out through a prepackaged Chapter 11 for tax and other legal reasons. To implement the plan, holders of two-thirds of the outstanding principal amount of the notes and a majority by number of holders will need to vote in favor.

"We have made significant progress in returning Zilog to full financial health," said Jim Thorburn, chief executive officer, in a news release. "We have a cash flow positive business and on approval of this plan we will substantially strengthen our balance sheet, with the elimination of our senior notes.

"This agreement in principle demonstrates strong support from key bondholders by giving us maximum financial flexibility to reinvest in the business, compete for new design wins and strengthen our market position as we navigate through this industry down cycle."

For the third quarter of 2001, Zilog reported EBITDA (earnings before interest, taxation, depreciation and amortization) of $6.6 million on revenues of $42.7 million.

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