Item 1.01. Entry into a Material Definitive Agreement.
On January 17, 2017, MagnaChip Semiconductor Corporation (the Company) closed the previously announced offering (the Notes
Offering) by MagnaChip Semiconductor S.A. (the Issuer) of $86.25 million aggregate principal amount of its 5.00% Exchangeable Senior Notes due 2021 (the Notes), reflecting the full exercise of the initial
purchasers option to purchase additional Notes.
The Company used the net proceeds from the Notes Offering to repurchase approximately
$11.4 million of the Companys common stock as part of its stock repurchase program and plans to use the remaining net proceeds from the Notes Offering (i) for its anticipated cost reduction program to be implemented during the first
half of 2017 (approximately
$30-40
million), (ii) for capital expenditures (approximately
$15-20
million), (iii) to repurchase additional common stock as part of its
stock repurchase program (up to $15 million in the aggregate) and (iv) for general corporate purposes.
The Notes were issued pursuant to an
Indenture, dated as of January 17, 2017 (the Indenture), among the Company, the Issuer and U.S. Bank National Association, as trustee. Interest on the Notes is payable semi-annually in cash in arrears on March 1 and
September 1 of each year, beginning on March 1, 2017, at a rate of 5.00% per year. The Notes mature on March 1, 2021 unless earlier exchanged or repurchased. The Notes are not redeemable prior to the maturity date and no sinking fund
is provided for the Notes. The Indenture provides for customary events of default.
The Notes are exchangeable by holders into shares of the
Companys voting common stock (the Common Stock) at each holders election. The initial exchange rate for the Notes is 121.1387 shares of Common Stock per $1,000 principal amount of Notes, equivalent to an initial exchange
price of approximately $8.26 per share of Common Stock. The exchange rate is subject to customary anti-dilution adjustments but will not be adjusted for any accrued and unpaid interest. In addition, holders who elect to exchange their Notes in
connection with certain corporate events are in certain cumstances entitled to an increased exchange rate. The Notes are exchangeable at any time prior to the close of business on the third business day immediately preceding March 1, 2021.
If the Issuer undergoes certain corporate events (each, a Fundamental Change), holders may require the Issuer to repurchase for cash all or any
portion of their Notes at a price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the Fundamental Change repurchase date.
The Notes are guaranteed by the Company. The Notes and the guarantee, as applicable, rank senior in right of payment with all of the Issuers and the
Companys existing and future senior indebtedness that is expressly subordinated in right of payment to the Notes and the guarantee, equal in right of payment to all of the Issuers and the Companys unsecured indebtedness that is not
so subordinated and effectively subordinated to any of the Issuers and the Companys secured indebtedness to the extent of the value of the assets securing such indebtedness.
The Indenture contains covenants that, among other things, restrict the ability of the Company, the Issuer and their restricted subsidiaries to:
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pay dividends, redeem shares or make other distributions with respect to equity interests, make payments with respect to subordinated indebtedness or other restricted payments;
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incur debt or create liens;
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make certain investments;
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designate subsidiaries as unrestricted subsidiaries;
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enter into transactions with affiliates; and
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consolidate, merge or dispose of all or substantially all of our assets, taken as a whole.
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These covenants
are subject to a number of important exceptions and qualifications.
The Notes were sold in a private offering to qualified institutional buyers that is exempt from registration
under the Securities Act of 1933, as amended (the Securities Act), in reliance upon Rule 144A under the Securities Act. The Company does not intend to file a shelf registration statement for the resale of the Notes or the Common Stock
issuable upon exchange of the Notes, if any.
The description of the Indenture and the Notes above is qualified in its entirety by reference to the text
of the Indenture and the form of Note, which will be filed with the Companys next periodic report.