TowerJazz (TSEM: 1.40 +0.02 +1.45%) is a pure-play semiconductor wafer foundry with two IC plants in Israel and one in California, that manufactures SiGe, MEMS, RF, embedded flash-based memory, analog/mixed-signal and CMOS image-sensor devices.The firm continues to make both operational and financial improvements to the business model. On July 11th, the firm continued on the financial front by announcing it agreed to exchange approximately $80 million in principal of its $123 million 8% convertible senior bonds due 2011 for new non-convertible senior bonds due 2015. The new non-convertible bonds will rank equally with the outstanding bonds and will have an 8% annual coupon.
In order for the institutional bondholder to agree, the firm issued warrants with an approximate 20% premium (over the average of the volume weighted average prices for the ordinary shares for the 15 trading days preceding execution of the Exchange Agreement).
Exchanging bondholders will receive warrants for the purchase of approximately $25 million Tower ordinary shares at an exercise price of $1.70 per share. The outstanding 8% convertible senior bonds being exchanged, which are convertible into approximately 20 million Tower ordinary shares, will be cancelled and retired upon consummation of this exchange transaction.
Another deal which will settle on or around the 12th of July is the issue approximately 5.4 million shares to YA Global Master SPV Ltd., for a purchase price of $7 million. Use of proceeds are listed as general corporate purposes, but we suspect the proceeds will be used to boost capacity expansion possibly at Fab 2.
On June 30th, 2010 TSEM announced it has signed an agreement with its lender, Wells Fargo Capital Finance, to extend its credit lines from September 2011 to September 2014. Under the agreement, the four-year lines totaling $45 million will bear an interest rate equal to, at the company’s option, the USD LIBOR rate plus a margin ranging from 2.25% to 2.75% per annum, or the lender’s prime rate plus a margin ranging from 0.50% to 1.00%.
On June 29th, 2010 TowerJazz and Vishay Intertechnology (VSH, the Siliconix division of which is the world leader in low-voltage power MOSFETs), announced that they are expanding their business relationship to include planar MOSFETs and Super Junction MOSFETs. Production of these products under the terms of the expanded relationship between TowerJazz and Vishay is expected to result in tens of millions of dollars in additional yearly revenue.
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