By William Gullotti
Buffalo, N.Y., June 26 – Wolfspeed, Inc. entered a financing arrangement in the form of a $1.25 billion placement of 9 7/8% secured notes due 2030 with Apollo Capital Solutions on June 23, according to an 8-K filing with the Securities and Exchange Commission on Monday.
The initial interest rate will remain fixed for three years. The interest rate will step up to 10 7/8% during the fourth year of the life of the notes and to 11 7/8% for the fifth year and thereafter.
The placement arrangement also includes a $750 million greenshoe.
The agreement also includes a Sept. 1, 2029 springing maturity date if more than $175 million of Wolfspeed’s 1.875% convertibles due 2029 are outstanding on that date.
There are multiple conditions, besides the springing maturity, for early redemption of the notes. Wolfspeed must make an offer to repurchase the notes if there is a non-ordinary course asset sale or casualty event. For the first three years, the applicable redemption price is 109.875. The applicable redemption price steps down to 109.40625 for the fourth year, to 104.9375 for the fifth and to par for the sixth year onward.
For the first three years, there is the potential of a make-whole call at 109.40625, plus remaining interest to the third anniversary, discounted at Treasuries plus 50 basis points to the redemption, with a minimum payment of par. After the third anniversary, the redemption prices above, relating to any mandatory asset sale potential redemption, would be in effect should there be a redemption at the option of the issuer.
There is a change-of-control put, which likewise uses the applicable redemption prices, except that the payout for a change-of-control within the first three years will be will be at the described make-whole redemption price minus 3%. After three years, any change-of-control redemption would be at the same prices listed above.
The notes also include an equity clawback clause, applicable in the first three years by which the issuer may redeem up to 35% of the notes at 109.875.
There is also a liquidity maintenance financial covenant requiring the company to have an aggregate amount of unrestricted cash and cash equivalents, maintained in accounts over which the agent has been granted a perfected first-lien security interest, of at least $500 million as of the last day of any calendar month. Upon achieving 30% utilization at its Mohawk Valley Fab facility and generating at least $240 million of revenue from products that are manufactured or produced on wafers that are fabricated at said facility, in each case over a sixth month period, the level of the liquidity covenant shall be permanently reduced to $325 million. Upon achieving 50% utilization and generating at least $450 million of revenue, the covenant will be permanently eliminated.
Wells Fargo & Co. and Morgan Stanley & Co. LLC served as financial advisers to Wolfspeed for the transaction.
On Monday in a related transaction, the company paid off and subsequently terminated its credit agreement with Wells Fargo Bank, NA as administrative agent, signed Jan. 9, 2015.
Wolfspeed is a Durham, N.C.-based bandgap semiconductor developer.
| Issuer: | Wolfspeed, Inc.
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| Amount: | $1.25 billion
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| Greenshoe: | $750 million
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| Issue: | Senior secured notes
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| Maturity: | June 23, 2030
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| Financial advisors: | Wells Fargo & Co., Morgan Stanley & Co. LLC
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| Trustee: | U.S. Bank Trust Co., NA
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| Counsel to issuer: | Latham & Watkins LLP, Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP
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| Counsel to purchasers: | Paul, Weiss, Rifkind, Wharton & Garrison LLP
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| Coupon: | 9 7/8% for three years; steps up to 10 7/8% for fourth year and to 11 7/8% for fifth year and thereafter
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| Price: | 96
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| Redemption prices: | 109.875 for first three years, 109.40625 for fourth year, 104.9375 for fifth year, par for sixth year onward
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| Call options: | Make-whole call at 109.875 plus interest to the third anniversary, discounted at Treasuries plus 50 bps to the redemption date, for first three years; callable thereafter at applicable redemption price
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| Equity clawback: | For first three years only, up to 35% at 109.875
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| Put options: | Change-of-control put, using make-whole redemption premium minus 3%, for first three years; change-of-control put at applicable redemption price for fourth year thereafter; at applicable redemption price following certain non-ordinary asset sales and casualty events
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| Settlement date: | June 23
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| Distribution: | Regulation S, Regulation D, Rule 144A
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