Specialty foundry Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM) has signed definitive agreements with Jazz Technologies Inc US and offshore institutional holders to reduce its debt. Under the terms of the agreement, bondholders will issue new unsecured bonds due December 2018 in lieu of $45 million aggregate principal out of $94 million aggregate principal amount of 8% senior bonds due June 2015. The new bonds will be unsecured and therefore structurally subordinated to the Wells Fargo credit line of up to $70 million due 2018, as are the currently outstanding bonds due June 2015.
When Tower acquired Jazz Technologies in 2010 for $44 million, it assumed debt worth $140 million in bonds.
Some of the bondholders have also agreed to purchase $10 million principal amount of the new bonds maturing 2018. These transactions will strengthen Tower's balance sheet by reducing net debt due through June 2015 by $55 million, comprising an increase of $10 million in its cash balance and a reduction of the bonds due June 2015 from $94 million to $49 million.
The new bonds, which will mature December 31, 2018, carry an 8% coupon payable in cash in two semi-annual installments through maturity and may be converted into ordinary shares of Tower at $10.07 per share, reflecting a 20% premium over the average closing price for the company’s ordinary shares for the five trading days prior to this agreement. The new Jazz bonds will not be guaranteed by Tower Semiconductor Ltd.
Tower CFO Oren Shirazi said, "This exchange and new note purchase with certain of our US and offshore existing bondholders is another vote of confidence from the investment community for our company and our long-term strategy. The $70 million Wells Fargo credit line extension we signed a few months ago, together with this transaction, are instrumental in enabling TowerJazz to execute on its strategic growth plan and further improve our balance sheet and financial position."
Tower CEO Russell Ellwanger said, "This bonds restructuring, together with the recently announced India cabinet decision on the 300mm fab establishment, the pending Panasonic joint venture which is expected to close within a few weeks, and our previously announced Q4 2013 year-over-year 25% organic growth, demonstrates a company actively making progress on its core business, creative M&A/Joint Venture, financials and balance sheet. The end result is a stronger company serving a continually growing customer base producing model shareholder value."
Published by Globes [online], Israel business news - www.globes-online.com - on March 20, 2014
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