NXP details $7 billion bank debt commitment for Freescale acquisition

By Sara Rosenberg

New York, March 3 – NXP Semiconductors NV disclosed in a 6-K filed with the Securities and Exchange Commission on Tuesday that is has received a commitment for $7 billion of senior secured bank debt to help fund its purchase of Freescale Semiconductor Ltd.

The debt consists of a $3.25 billion five-year covenant-light term loan B-1, a $3.25 billion seven-year covenant-light term loan B-2 and a $500 million five-year super-priority revolver.

Pricing on the term loan B-1 is expected at Libor plus 325 basis points with a step-down to Libor plus 300 bps at 2 times consolidated net leverage, pricing on the term loan B-2 is expected at Libor plus 350 bps with a step-down to Libor plus 325 bps at 2 times consolidated net leverage, and pricing on the revolver is expected at Libor plus 200 bps with step-downs to Libor plus 175 bps at 2 times consolidated net leverage and Libor us 150 bps at 1.5 times consolidated net leverage.

The term loans have a 0.75% Libor floor and 101 soft call protection for one year, the filing said.

Amortization on the term loan B-1 is 10% per annum and amortization on the term loan B-2 is 1% per annum.

In addition to helping fund the Freescale acquisition, the new loans will be used to repay any Freescale debt that comes due as a result of the change of control transaction.

Credit Suisse Securities (USA) LLC is the lead bank on the debt.

Other funds for the transaction are expected to come from $1 billion of cash from the balance sheet and about 115 million NXP ordinary shares.

Under the agreement, Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP ordinary share for each Freescale common share held at the close of the transaction.

The purchase price implies a total equity value for Freescale of about $11.8 billion and a total enterprise value of around $16.7 billion including Freescale’s net debt.

Closing is expected in the second half of the year, subject to regulatory approvals in various jurisdictions and customary conditions, as well as the approval of NXP and Freescale shareholders.

Revenue of the combined company is more than $10 billion.

At closing, net debt to EBITDA will be about 3 times, but within six quarters, net debt is expected to be back to around 2 times.

NXP is an Eindhoven, Netherlands-based maker of semiconductors. Freescale is an Austin, Texas-based semiconductor company.

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