UPDATE 2-NXP measures cut debt but bondholders want more

Tue Mar 31, 2009 9:10am EDT

Related Topics

* NXP says debt reduced by about $465 billion

* Exchanging $420 mln and 131 mln euros in debt

* New bonds rank higher than old bonds, giving more security

* Bondholder group expects further restructuring measures

(Adds bondholder reaction, details, background)

AMSTERDAM/LONDON, March 31 (Reuters) - Dutch NXP Semiconductors [NXP.UL], struggling with a $5.96 billion debt burden and falling sales, said on Tuesday it had cut its debt by about $465 million in a debt-swap restructuring deal.

But bondholders who did not take up the offer to swap existing debt for more highly ranking secured notes have repeated their call for a wider restructuring of the company's debts, saying the low take-up of the exchange makes it more likely further action is needed to reduce NXP's debts.

NXP is exchanging $420 million and 131 million euros ($174 million) of senior bonds into $90 million and 29 million euros of new notes, the company said in a statement.

"The new bonds have a higher ranking," an NXP spokesman said. "The higher the ranking, the more security you have."

"The new super priority notes will be guaranteed by certain of the company's current and future material wholly-owned subsidiaries," NXP said.

NXP proposed earlier this month to exchange up to 250 million euros in new bonds for a maximum of $1.9 billion of outstanding debt.

"Naturally, we would have been pleased even more if we had reached that," the NXP spokesman said.

The debt exchange at NXP, which was spun off from Philips Electronics (PHG.AS) in 2006, comes as the economic downturn hits the company's markets for its chips used in digital TVs, mobile phones and autos. It reported a 2008 loss of $3.6 billion.

A group of bondholders have criticised the bond exchange and pushed for a wider restructuring of NXP's debt load. They believe the exchange did not address NXP's underlying problems, which they identify as falling sales, too much debt and excessive capacity in the semiconductor industry, a source close to the bondholders said last week. [ID:nLP975703]

The company's lenders are now looking to April 15, NXP's next interest date, as a potential trigger for another debt restructuring announcement, the same bondholder source said on Tuesday.

Many bondholders believe the value of the company is now less than its outstanding debt, the source said, meaning any restructuring must involve a contribution from the company's shareholders, either in the form of a cash contribution or a debt-for-equity swap.

An NXP spokesman declined to comment on any future debt restructuring.

"We are structurally on good terms with our bondholders. We know about [last week's] Reuters article. I cannot give further comment," the NXP spokesman said.

The spokesman added that the company had a strong cash position to cover any debt payments, with $1.8 billion cash available at the end of 2008.

NXP competes with France's STMicroelectronics (STM.PA), Germany's Infineon (IFXGn.DE), U.S. Texas Instruments TXN.N and Freescale Semiconductor [FSLSM.UL].

Senior lenders to Freescale last week filed a suit against the chip maker over that company's debt exchange. The senior lenders claimed the exchange "unjustly enriched" one group of bondholders at the expense of another class of lenders. [ID:nN25411825]

NXP is mostly owned by a private equity consortium that includes KKR [KKR.UL]. Philips still has a stake of about 20 percent. ($1=.7551 Euro) (Reporting by Gilbert Kreijger and Tom Freke; Editing by Hans Peters)

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