Aliso Viejo-based chipmaker Microsemi Corp. will finance its $633 million buy of Zarlink Semiconductor Inc. with an $800 million loan from Morgan Stanley Senior Funding Inc., a unit of New York-based investment bank Morgan Stanley & Co.
The seven-year-term loan has an interest rate of 5.5% to 5.75%, Microsemi said.
Microsemi opted for a bank loan instead of corporate bonds to finance its largest acquisition to date because it provided more “flexibility,” according to Rob Adams, vice president of corporate development.
Corporate bonds would hold more stringent covenants and a higher interest rate for Microsemi, he said.
Last week New York-based Standard & Poor’s Financial Services LLC affirmed Microsemi’s junk bond “BB-” corporate rating and removed the rating from CreditWatch with negative implications, where it had been since late July when it announced the hostile takeover.
S&P’s outlook on the corporate credit rating is stable.
The agency also affirmed Microsemi’s “BB+” senior debt rating on the $375 million term loan it took in November 2010 when it acquired Northern California’s Actel Corp. for $430 million. S&P said it expects to lower that rating to “BB”—the same rating given to the new $800 million term loan—when the transaction is complete.
S&P said the Zarlink deal strengthens Microsemi’s niche position in the analog and mixed-signal chip market, leading to continued modest revenue and profitability growth.
It also expects Microsemi to reduce its debt to buffer cyclical challenges.
“I think we’re focused on paying down that soon,” Adams said.
The ratings play a key role for companies looking to raise money by selling bonds. The lower a company’s rating, the higher the interest it pays to draw investors.
The difference in a solid rating and a riskier one could mean millions in how much interest a company pays each year.
The deal for chipmaker Zarlink, expected to close next month, provides Microsemi inroads in the communications and medical markets—two key segments in its growth plan.
Mindspeed, Qualcomm
Newport Beach-based networking chipmaker Mindspeed Technologies Inc. has partnered with a unit of Qualcomm Corp. to introduce a new line of processors that will speed the flow of data for voice and video-over-IP media streams.
Mindspeed partnered with Qualcomm Atheros Inc., the networking and connectivity unit of the San Diego-based chipmaker. The new processors embed Qualcomm’s chips as part of Mindspeed’s broadband system-on-a-chip and software.
Key applications include video and voice content conversion in telecommunications and multimedia messaging services, along with home Ethernet uplinks.
BlizzCon Billing: Foo Fighters
Alternative rock band Foo Fighters will headline the sold-out BlizzCon, an annual two-day gathering held by Irvine-based Blizzard Entertainment Inc., on Oct. 21 and 22 at the Anaheim Convention Center.
Blizzard’s in-house metal band—The Artist Formerly Known as Level 80 Elite Tauren Chieftain—will open the concert with new and familiar songs from World of Warcraft, StarCraft, and Diablo video games.
Some 20,000 gamers are expected to descend on Orange County for BlizzCon, which will feature two of the biggest online gaming competitions in the world: the 2011 Global Battle.net Invitational and the 2011 Global StarCraft II League October Final.
The events are based on Blizzard games and will mark the first time the two competitions will be held outside of South Korea.
Foo Fighters’ BlizzCon debut marks founder Dave Grohl’s return to the convention after playing drums for Tenacious D at last year’s show.
With tongue-in-cheek, Grohl said music historians will look back at BlizzCon 2011 as the unquestionable pinnacle of Foo Fighters’ long and illustrious career.
“We look forward to living up to that prediction by bringing the Horde and Alliance together to rock the hell out of Anaheim next month,” he said.
Blizzard Entertainment is the largest software company based in Orange County with yearly sales of about $1.4 billion.
The company ultimately is part of France’s Vivendi SA, which bought Activision in 2008 and combined it with Blizzard in a deal valued at about $10 billion.
