Bondholders seek NXP restructuring

A group of bondholders is pushing for a wider restructuring of Dutch semiconductor company NXP’s $5.96bn debt load, a source close to the bondholders said on Wednesday.

NXP on March 3 proposed to exchange up to €250m ($337.5m) in new bonds for a maximum of $1.9bn of outstanding debt, but the group wants wider measures after first results of the bond exchange disappointed.

“The exchange does not tackle the company’s real issues, it just delays the inevitable – a wider restructuring of NXP’s finances,” the source told Reuters.

The opponents say the exchange is merely a “sticking plaster” over the company’s problems, which they identify as falling sales, too much debt and excessive capacity in the semiconductor industry. Instead, they may push for an extra cash injection by NXP’s owners, or even a debt-for-equity swap.

Holders of senior bonds are also unhappy the debt-for-debt swap would see junior bondholders receive debt that ranked above their claims, the source said. The bondholders have hired law firm Cadwalader, Wickersham & Taft LLP as adviser. NXP is being advised by JP Morgan, Lazard and Morgan Stanley.

NXP offered bondholders a premium to exchange by March 16, but the take-up rate at that date was just 10 per cent.

That result was “poor”, Unicredit credit analyst Stephan Haber said in a note published on Tuesday. He said the exchange results after the March 23 offer date “do not look much better”. The final deadline for the bond exchange is March 30.

Analysts said the exchange may not have been attractive because NXP debt is trading at a large discount.

“If I owned the bonds, I would not trade them in because I am losing money doing that,” said Zhiping Zhao, an analyst at CreditSights. “If that’s the only value on offer, it is much better to restructure the company.”

NXP had the option to cancel the bond swap if the take-up rate of the exchange was lower than expected, the bondholder source said.
NXP said it could not comment on the exchange, or NXP’s financial condition, until the bond exchange had concluded.

A restructuring of NXP’s finances had been expected for some time after the economic downturn hurt markets for its chips for digital TVs, mobile phones and autos. US rival Freescale Semiconductor Holdings made a similar debt exchange offer last monh.

NXP was spun off from Philips Electronics in 2006, and sold to a private equity consortium that includes KKR. Philips still has a stake of about 20 per cent

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