I guessing that the market thinks SPSN is redeeming the 12.75% 2016 notes because there is some covenant in them which is impeding their financial flexibility.
From the 10K of Spansion:
Senior Subordinated Notes
On December 21, 2005, we issued to AMD $175 million aggregate principal amount of our 12.75% Senior Subordinated Notes Due 2016. The senior subordinated notes were issued at 90.828% of face value, resulting in net proceeds of approximately $158.9 million. The senior subordinated notes are general unsecured obligations of ours and rank junior to any of our existing and future senior debt. Interest is payable on April 15 and October 15 of each year beginning April 15, 2006 until the maturity date of April 15, 2016....so they presumably paid $11.2M to AMD on April 15 Certain events may result in the accelerated maturity of the senior subordinated notes, including a default in any interest, principal or premium amount payment; a merger, consolidation or sale of all or substantially all of our property; a breach of covenants in the senior subordinated notes or the respective indenture; {a possibility? What are these "covenants?"} a default in certain debts; or if a court enters certain orders or decrees under any bankruptcy law. Upon occurrence of one of these events, the principal of and accrued interest on all of the senior notes or the senior subordinated notes, as the case may be, may be immediately due and payable. If we incur any judgment for the payment of money in an aggregate amount in excess of $50 million or takes certain voluntary actions in connection to insolvency, all amounts on the senior subordinated notes shall be due and payable immediately...
SPSN would not redeem these at 100% unless they had to. They were issued at 91% of face value, so they will be taking a $22M hit to pay off at par, and there might even be an additional penalty. I was not able to find a document listing the terms (convenants) of the Notes.
So my guess is that either AMD wants the cash for an acquisition or SPSN wants to make an acquisition, the latter less likely, though I notice ATML up 3%. But the market is probably interpreting the early redemption as a desperate move born of cash flow problems.
Petz |
