Spansion rights offering backstop deal, mandate letter approved

By Caroline Salls

Pittsburgh, Jan. 7 - Spansion Inc. received court approval to enter into a backstop rights purchase agreement with Silver Lake Sumeru, LP and a financing mandate letter from Barclays Capital Inc., according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

The court also approved a proposal letter under which Bank of America, NA has conditionally offered to arrange a post-confirmation senior credit facility for Spansion LLC.

Under its plan of reorganization, Spansion said it would distribute substantially all of the equity interests in the reorganized company to unsecured creditors and give the holders of its floating-rate notes a package of consideration consisting of cash, $237.5 million in new senior notes and $237.5 million of new convertible notes.

The plan also gives the company the option to conduct a rights offering under which some unsecured creditors can acquire new common stock and incur additional debt.

The proceeds of the rights offering would be used to reduce the principal amount of the new senior notes and the new convertible notes.

As a result, if Spansion receives enough rights offering proceeds, the floating-rate noteholders would be paid in full in cash instead of receiving the new notes.

Specifically, the company said participants would have the right to purchase a total of 12.97 million shares of new common stock at a price of $8.43 per share, for a total purchase price of $109.38 million.

However, Spansion said it is likely that a significant number of eligible rights offering participants might choose not to participate.

As a result, Spansion creditor and senior noteholder Silver Lake Sumeru has agreed to backstop the entire $109.38 million rights offering in exchange for a $4.5 million backstop fee.

Under the mandate letter, Barclays has agreed to act as sole lead underwriter, sole lead initial purchaser, sole bookrunner, administrative agent and sole lead arranger in connection with any debt financing raised by the company.

Objections overruled

Judge Kevin J. Carey also overruled objections to the backstop agreement and mandate letter filed by an informal committee of Spansion's convertible noteholders.

As previously reported, the noteholders argued that neither the backstop agreement nor the proposed financing is necessary.

Spansion, a Sunnyvale, Calif.-based maker of flash memory products, filed for bankruptcy on March 1, 2009. Its Chapter 11 case number is 09-10690.

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