Chipmaker Conexant Systems files for chapter 11, to slash debt

Thu Feb 28, 2013 4:40am EST

Feb 28 (Reuters) - Chipmaker Conexant Systems Inc filed for pre-arranged chapter 11 bankruptcy protection two years after it went private, hurt by declining revenue, increasing costs and higher debt load, court documents showed.

Conexant Systems said its sole secured lender, QP SFM Capital Holdings Ltd, an entity managed by Soros Fund Management LLC, will provide $15 Million in debtor-in-possession (DIP) financing.

In a pre-arranged bankruptcy, a company enters Chapter 11 process after negotiating the terms of a restructuring with its major stakeholders.

As part of the restructuring, QP SFM Capital Holdings will exchange about $195 million of secured debt into equity in the reorganized company.

The restructuring plan will wipe out all outstanding secured debt of Conexant, which makes chips for audio, video applications and modems.

The company expects the restructuring to create a stronger capital structure and significantly reduce its breakeven revenue level.

In 2011, Golden Gate Private Equity and August Capital purchased the outstanding shares of Conexant's stock for $2.40 per share, in a deal valued at about $200 million.

That price exceeded a prior offer of $2.25 per share, or about $190 million from Standard Microsystems Corp, a court filing showed.

"Due to an unanticipated overall weakness across the semiconductor industry ... revenues continued to slide after the transaction," Conexant said in the filing.

The chipmaker said in the filing that it is currently saddled with "outsized and untenable real estate costs".

"Conexant entered into several long-term real estate leases to house newly acquired business lines. After divesting itself of some of these businesses, Conexant was left with these dead leases," the company said.

Since its acquisition by Golden Gate, Conexant said more than half of its cash on hand has been spent on interest payments and payments for its "dead leases".

Conexant said it expects to receive court approval for its restructuring plan in less than 85 days.

The case is Conexant Systems Inc, Case No. 13-10367, U.S. Bankruptcy Court, District of Delaware.

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