Item 1.01. Entry |
into a Material Definitive Agreement. |
On February 28, 2023, ON Semiconductor Corporation (the “Company”) completed its previously announced private unregistered offering of $1.5 billion aggregate principal amount of its 0.50% Convertible Senior Notes due 2029 (the “Notes”), which amount includes the full exercise of the initial purchasers’ option to purchase up to $200 million aggregate principal amount of additional Notes.
Indenture
The Notes were issued under an Indenture (the “Indenture”), dated as of February 28, 2023, by and among the Company, the Guarantors (as defined below) and Computershare Trust Company, National Association, as trustee (the “Trustee”). The Indenture provides, among other things, that the Notes will bear interest at a rate of 0.50% per year, payable semi-annually on March 1 and September 1 of each year, beginning on September 1, 2023. The Notes will mature on March 1, 2029, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms.
The Notes are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company’s subsidiaries (the “Guarantors”) that is a borrower or guarantor under the Company’s Credit Agreement, dated as of April 15, 2016, as subsequently amended, by and among the Company, as borrower, the several lenders party thereto, Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and certain other parties (as amended, extended, renewed, restated, supplemented or otherwise modified from time to time (the “Credit Agreement”)). In the future, the Notes will be fully and unconditionally guaranteed by each of the Company’s U.S. subsidiaries that becomes a borrower or guarantees any indebtedness under the Credit Agreement.
The Company received net proceeds from the offering of the Notes of approximately $1,466 million, after deducting the initial purchasers’ discounts and after deducting offering expenses payable by the Company. The Company intends to use the net proceeds from the offering of the Notes, together with cash on hand, (i) to repay up to $1,086.0 million of the existing outstanding indebtedness under the Company’s Term Loan “B” Facility and related transaction fees and expenses, if any, (ii) to pay the approximately $171.5 million cost of the Convertible Note Hedges (as defined below) (after such cost is partially offset by the proceeds to the Company from the sale of the Warrants (as defined below)), and (iii) with respect to the remainder of the net proceeds, if any, for general corporate purposes.
The Company may redeem for cash all or any portion of the Notes, at the Company’s option at any time and from time to time, on or after March 6, 2026 if the last reported sale price of the Company’s common stock, par value $0.01 per share (“Common Stock”) has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any consecutive 30 trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the Notes.
Prior to the close of business on the business day immediately preceding December 1, 2028, holders of the Notes may convert their Notes at their option only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2023 (and only during such calendar quarter), if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five consecutive business-day period after any five consecutive trading-day period in which the trading price per $1,000 principal amount of the Notes for each trading day of such period was less than 98% of the product of the last reported sale price of Common Stock and the conversion rate on each such trading day; (iii) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate transactions described in the Indenture. On or after December 1, 2028, until the close of business on the second scheduled