Chipmaker TowerJazz to lengthen bond payments to 2018

JERUSALEM, March 20 Thu Mar 20, 2014 5:22am EDT

JERUSALEM, March 20 (Reuters) - Israeli chipmaker TowerJazz said on Thursday it agreed to trade short-term debt for longer-term debt in a move aimed at improving its balance sheet.

The company will issue new unsecured bonds due December 2018 to bondholders.

It was slated to pay the remaining $94 million of its debt to bondholders in June 2015 but TowerJazz forged a deal with U.S. and offshore institutional investors in which it will pay $49 million next year and the rest in 2018.

TowerJazz inherited $140 million of bonds when Tower Semiconductor bought Jazz Technologies in 2008 and paid down $44 million in 2010.

Oren Shirazi, TowerJazz's chief financial officer, said the company could have used much of its $120 million in cash to pay off its debt next year but investors would find that troubling.

"It's just improving our balance sheet and enabling us to actually have some leverage," he told Reuters. "We believe having $49 million outstanding after next year is a very reasonable amount."

As part of the deal, some bondholders have agreed to buy $10 million of the new bonds maturing in 2018. The bonds carry an 8 percent coupon payable in cash in two semi-annual instalments through maturity and may be converted to ordinary Tower stock at $10.07 per share, a 20 percent premium over the average closing price of the five sessions ended one day prior to the signing of the agreement.

Current Jazz bondholders include Principal Global Investors and Pine River Capital Management.

"This bonds restructuring ... demonstrates a company actively making progress on its core business, creative M&A/joint venture, financials and balance sheet," said Chief Executive Russell Ellwanger in a statement.

He pointed to a recent India cabinet decision to establish a chip plant, in which TowerJazz will participate, as well as a planned joint venture with Panasonic Corp that is expected to close in the coming weeks. (Reporting by Steven Scheer)

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