Micron's (MU) Taiwan Unit and Inotera Enter $2.54B Syndicated Loan Agreement with BoT

October 11, 2016 9:56 AM EDT

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Micron Technology (Nasdaq: MU) disclosed the following in a U.S. SEC filing on Tuesday:

On February 3, 2016, Micron Technology, Inc. (“Micron”) filed a Current Report on Form 8-K to report that Micron Technology B.V. (“Micron BV”), a wholly-owned subsidiary of Micron, Micron Semiconductor Taiwan Co. Ltd. (“MSTW”), a wholly-owned subsidiary of Micron BV, and Inotera Memories, Inc. (“Inotera”) had entered into a Share Swap Agreement (the “Definitive Share Swap Agreement”) to govern MSTW’s contemplated 100% share swap pursuant to Article 29 of the Republic of China Mergers and Acquisitions Act and thereby acquire 100% of the issued and outstanding shares of Inotera (such transaction, the “Share Swap”). Inotera is a Taiwan-based company that presently manufactures DRAM products and sells such products exclusively to Micron.

Under the Definitive Share Swap Agreement, the consummation of the Share Swap is subject to various conditions, including but not limited to the consummation and funding of debt financing, on terms satisfactory to MSTW or its designee, resulting in aggregate proceeds to MSTW or its designee of at least NT$80 billion to fund the Share Swap (the “Debt Financing”). Micron is filing this Current Report on Form 8-K to report that, on October 11, 2016, MSTW and Inotera entered into a loan agreement providing for the Debt Financing, subject to the terms and conditions of such loan agreement.

Item 1.01. Entry into a Material Definitive Agreement.

On October 11, 2016, Inotera and MSTW, as co-borrowers, entered into a Syndicated Loan Agreement (the “Loan Agreement”) with Bank of Taiwan, as Facility Agent, Mega International Commercial Bank Co., Ltd. (“Mega Bank”), as Collateral Agent, Taiwan Business Bank, Ltd. (“Taiwan Business Bank”), as Document Management Agent, Bank of Taiwan, Mega Bank, Taiwan Business Bank, Chang Hwa Commercial Bank, Land Bank of Taiwan, Taiwan Cooperative Bank, Credit Agricole Corporate and Investment Bank, Taipei Branch, CTBC Bank Co., Ltd., Hua Nan Commercial Bank, Ltd. and Yuanta Commercial Bank, as the mandated lead arrangers and as lenders, and certain other financial institutions as additional lenders.

The Loan Agreement provides for a secured delayed single-draw term loan facility, with a maximum aggregate borrowing amount of NT$80 billion (approximately US$2.54 billion). Proceeds of the loan under the Loan Agreement will be used by MSTW to pay a portion of the consideration and any related transaction costs for the Share Swap and to provide working capital for Inotera. The indebtedness under the Loan Agreement will be secured by liens in certain assets, including, among other things, a real estate mortgage on Inotera’s main production facility and site, a chattel mortgage over certain equipment of Inotera, a pledge of all of the stock of MSTW held by Micron BV and a pledge of approximately 80% of the stock of Inotera held by MSTW following the consummation of the Share Swap. In addition, payment of intercompany loans made by shareholders of Inotera and MSTW is generally required to be subordinated to repayment of the loan under the Loan Agreement, subject to certain permitted exceptions.

Inotera and MSTW will be co-borrowers under the Loan Agreement and jointly and severally liable for all indebtedness under the Loan Agreement upon the completion of the Share Swap. Micron will guarantee all of Inotera’s and MSTW’s obligations under the Loan Agreement.

Borrowings under the Loan Agreement can be made in a single draw on or prior to July 10, 2017, subject to the satisfaction of customary conditions precedent. Micron expects the amount of NT$80 billion under the Loan Agreement to be borrowed on or before December 6, 2016 which is the date that has been established by Inotera’s board of directors as the date for the consummation of the Share Swap. The loan will bear interest at a floating rate equal to the three-month or six month TAIBOR, at the option of MSTW and Inotera, plus a margin of 2.05% per annum, payable monthly in arrears.

Under the Loan Agreement, MSTW and/or Inotera are also obligated to pay upfront fees, agency fees and other closing fees customary for a credit facility of this size and type. The loan will mature 5 years from the date it is made and principal is payable in six equal semi-annual installments, commencing thirty months after such loan is made.

MSTW and/or Inotera may prepay the loan under the Loan Agreement, subject to the payment of customary funding breakage amounts. MSTW and Inotera are required to make a mandatory prepayment of the loan under the Loan Agreement with proceeds from certain dispositions of collateral securing the loan and certain proceeds of property insurance to the extent such proceeds are not permitted to be used for repair or replacement of damaged or destroyed collateral. Any such mandatory prepayments would be applied to the principal repayment installments on the loan in inverse order of maturity.

The Loan Agreement contains affirmative and negative covenants which are customary for financings of this type, including covenants that limit or restrict: the ability to create liens in or dispose of collateral securing obligations under the Loan Agreement, mergers involving MSTW and/or Inotera, loans or guarantees to third parties by Inotera and/or MSTW and MSTW’s distribution of cash dividends (subject to satisfaction of certain financial conditions).

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