|[February 28, 2013]
Conexant Systems Reaches Comprehensive Agreement to Significantly Reduce Debt, Enhance Financial Flexibility and Improve Capital Structure
NEWPORT BEACH, Calif. --(Business Wire)--
Conexant Systems (News - Alert) Inc. ("Conexant" or the "Company"), a leading supplier
of innovative semiconductor solutions for imaging, audio, embedded
modem, and video applications, today announced that it has reached an
agreement to facilitate an expedited restructuring of the Company's
balance sheet with the Company's equity sponsors and its sole secured
lender, QP SFM Capital Holdings Limited (the "Secured Lender"), an
entity managed by Soros Fund Management LLC.
As part of the restructuring, the Secured Lender will exchange
approximately $195 million of secured debt into equity in the
reorganized Company. In addition, the Secured Lender will receive $76
million of unsecured notes issued by a holding company, which can elect
to either pay interest in cash or accrue interest in kind. The new
unsecured notes will be non-recourse to the reorganized Conexant
operating company. Upon implementation, this restructuring will (i)
eliminate debt at the operating company, (ii) reduce annual cash payment
of interest by approximately $19.7 million and (iii) cut excess real
estate expenses by approximately $7 million annually. To effectuate the
restructuring, the Secured Lender will provide $15 million through a
debtor-in-possession financing facility that will convert into equity in
the reorganized Company. The Company expects that the restructuring will
create a stronger capital structure, significantly reduce its break-even
revenue level and enable it to generate significant positive cash flow.
The restructured Conexant will be well-positioned for long-term growth
and improved profitability.
To implement the restructuring agreement, Conexant voluntarily commenced
cases nder Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware (the
"Court"). The Company expects to receive Court approval for its
"Pre-Arranged" plan of reorganization (the "Pre-Arranged Plan") in less
than 85 days. The Company expects that operations will continue in the
ordinary course throughout the financial restructuring process, and none
of Conexant's foreign operating subsidiaries are expected to be directly
impacted by the filing.
"Following a comprehensive strategic and financial review of the
business, we are pleased to have reached an agreement that will allow
Conexant to expeditiously complete our financial restructuring
initiatives and ensure that we are able to continue serving our
customers for many years to come," said Sailesh Chittipeddi (News - Alert), President
and Chief Executive Officer of Conexant. "Our Pre-Arranged financial
restructuring provides for a clear path to renewed growth and success,
and upon emergence, Conexant will be a leaner company with a stronger
balance sheet that allows for a more focused and consistent investment
in product lines. We thank our employees for their focus and commitment
and appreciate the support of our lenders, equity partners, customers,
suppliers and stakeholders."
In conjunction with today's filing, the Company filed a number of
customary motions and expects to receive immediate authority to continue
to support its employees, customers and suppliers during the financial
restructuring process. As part of these motions, the Company has asked
the Court for permission to continue paying employee wages and salaries
and to provide employee benefits without interruption. The Company has
also asked to continue honoring certain customer policies and programs
to ensure that the restructuring process will have minimal effect on its
customers. Additionally, during the Chapter 11 process, suppliers will
be paid in full for all goods and services provided after the filing
date as required by applicable law.
The implementation of the Pre-Arranged Plan is dependent upon a number
of factors, including the approval of a disclosure statement and
confirmation and consummation of the Pre-Arranged Plan in accordance
with applicable law. This release is not intended as a solicitation for
a vote on the Pre-Arranged Plan.
Kirkland & Ellis LLP and Klehr Harrison Harvey Branzburg LLP
are serving as legal counsel and Alvarez & Marsal is acting as
restructuring advisor to Conexant. Akin Gump Strauss Hauer & Feld LLP
and Pepper Hamilton LLP are serving as legal counsel and Blackstone
Advisory Partners L.P. as restructuring advisor to the Secured Lender.
Conexant's comprehensive portfolio of innovative semiconductor solutions
includes products for imaging, audio, embedded modem, and video
surveillance applications. Conexant is a fabless semiconductor company
headquartered in Newport Beach, California. To learn more, please visit www.conexant.com.
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