By Sakthi Prasad
(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)
In a pre-arranged bankruptcy, a company enters Chapter 11
process after negotiating the terms of a restructuring with its
As part of the restructuring, QP SFM Capital Holdings will
exchange about $195 million of secured debt into equity in the
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
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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