On October 25, 2010, Tower Semiconductor ( TSEM ) successfully completed the institutional stage of a fund raising in Israel, receiving commitments from investors to a new series of long-term bonds it intends to issue. The bonds will mature in two equal installments on December 2015 and December 2016.
The series F bonds will be NIS denominated and will be linked to the exchange rate of the NIS into the US Dollar. Under the terms of the bonds, it will carry an interest rate of 7.8% per annum, payable semi-annually on June 30 and on December 31 of each year through 2016, commencing December 31, 2010, and will be convertible into the Company’s ordinary shares commencing September 2012 at about 20 percent premium over the Company’s ordinary shares market price. (With a 2 year vesting period ending September 2012)
By October 27th the firm had $100 million in commitments. Cash will be used to grow internal capacity (mainly fab2) potential M&A.
Looking at the past year this completes a comprehensive debt restructure. This restructure comprised the extension of the $45 million Wells-Fargo credit lines, $80 million Jazz level bonds exchange to bonds due in 2015, $50 million pay down and restructure of the remaining $160 million Israeli banks debt to a long term loan and this deal. Tower has created a new balance sheet with zero bank loans’ principal due during the coming 3 years, servable debt ratios and a cash balance which will enable the firm to be flexible if M&A opportunities present themselves.
Written by Ken Nagy, CFA
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