News Article
Tower Semiconductor restructures its balance sheet
The company announces signing and closing of definite agreements with its lenders in a bid to reduce a $250 million debt and restructure the balance sheet. The agreement will increase the shareholders' equity, improve cash flow and finances.
Tower Semiconductor, an independent specialty foundry, announced that it has signed and closed definitive agreements with its lender banks and Israel Corp. These agreements are based on the previously announced memorandum of understanding dated August 20, 2008.
According to the agreements, $250 million of Tower's debt to Bank Leumi, Bank Hapoalim and Israel Corp., will be forgiven in exchange for equity capital notes of the company, exercisable into ordinary shares at $1.42 per share. This price per share represents two times the average closing price of Tower's stock on NASDAQ for the ten trading days prior to August 7, 2008, which was the date of the Company's public announcement regarding its debt restructuring negotiations with the banks and Israel Corp. The conversion of the debt into equity capital notes reduces Tower's debt by approximately $250 million, increases its shareholders' equity on its balance sheet by approximately $250 million, as well as improves its cash flow margins, statement of operations results and financial position. Further, the agreement will result in a one time gain of approximately $130 million that will be recorded in the statement of operations of the company for the third quarter of 2008. Also according to the agreements, Israel Corp. will invest $20 million in Tower and has committed to invest up to an additional $20 million, under the same terms as was previously announced on August 20, 2008.
In addition, the agreements postpone repayment of the remaining principal, modify the interest rate and waive interest payments and financial covenants as follows: (i) the repayment of the remaining principal of the loans is postponed to begin in September 2010; (ii) interest payments originally due September 2008 through June 2009 are added to the principal payments, which are scheduled to be paid in 8 equal quarterly instalments commencing in September 2010 and ending in June 2012; (iii) the interest rate on the remaining bank debt will be LIBOR plus 2.5 percent per annum; and (iv) the banks waived in full the Company's compliance with financial covenants through the end of 2008 and revised such covenants for the period commencing 2009 to reflect the Company's updated forecasts.
Russell Ellwanger, Tower's chief executive officer, commented, "This period of time is very exciting for Tower Semiconductor. More doors of opportunity are open to us now than any other time in our history. We appreciate the Israel Corporation's investment, in providing us with the capital to fund our continued growth, as well as the ongoing partnership with our banks that resulted in the successful restructuring of our debt, also enabling further growth. This new capital and our strengthened balance sheet combined with last Friday's close of the merger with Jazz Semiconductor accelerates Tower's trajectory towards realising our goal of becoming the number one specialty foundry in the world."
According to the agreements, $250 million of Tower's debt to Bank Leumi, Bank Hapoalim and Israel Corp., will be forgiven in exchange for equity capital notes of the company, exercisable into ordinary shares at $1.42 per share. This price per share represents two times the average closing price of Tower's stock on NASDAQ for the ten trading days prior to August 7, 2008, which was the date of the Company's public announcement regarding its debt restructuring negotiations with the banks and Israel Corp. The conversion of the debt into equity capital notes reduces Tower's debt by approximately $250 million, increases its shareholders' equity on its balance sheet by approximately $250 million, as well as improves its cash flow margins, statement of operations results and financial position. Further, the agreement will result in a one time gain of approximately $130 million that will be recorded in the statement of operations of the company for the third quarter of 2008. Also according to the agreements, Israel Corp. will invest $20 million in Tower and has committed to invest up to an additional $20 million, under the same terms as was previously announced on August 20, 2008.
In addition, the agreements postpone repayment of the remaining principal, modify the interest rate and waive interest payments and financial covenants as follows: (i) the repayment of the remaining principal of the loans is postponed to begin in September 2010; (ii) interest payments originally due September 2008 through June 2009 are added to the principal payments, which are scheduled to be paid in 8 equal quarterly instalments commencing in September 2010 and ending in June 2012; (iii) the interest rate on the remaining bank debt will be LIBOR plus 2.5 percent per annum; and (iv) the banks waived in full the Company's compliance with financial covenants through the end of 2008 and revised such covenants for the period commencing 2009 to reflect the Company's updated forecasts.
Russell Ellwanger, Tower's chief executive officer, commented, "This period of time is very exciting for Tower Semiconductor. More doors of opportunity are open to us now than any other time in our history. We appreciate the Israel Corporation's investment, in providing us with the capital to fund our continued growth, as well as the ongoing partnership with our banks that resulted in the successful restructuring of our debt, also enabling further growth. This new capital and our strengthened balance sheet combined with last Friday's close of the merger with Jazz Semiconductor accelerates Tower's trajectory towards realising our goal of becoming the number one specialty foundry in the world."
