Austin-based Freescale Semiconductor Inc., which employs about 3,000 in the Phoenix area, wants to be a public company again.
The manufacturer recently filed a statement with U.S. Securities and Exchange Commission to raise up to $1.15 billion through an initial public offering.
Freescale is seeking the proceeds to pay down $7.6 billion in debt as of the end of 2010. The company has $1.2 billion of senior unsecured notes due in 2014. It also has a loan of about $600 million coming due in 2012.
Freescale was spun out of Motorola Inc. in 2004. After the move, it was a public company until 2006 when it was bought for $17.6 billion in a private-equity-led leveraged buyout that included TPG Capital, Blackstone Group and Carlyle Group. The deal left the company with a heavy debt load.
The proposed IPO has done nothing to improve the company's credit ratings. Fitch Ratings said last week it believes the deal would not affect ratings.
"While a successful IPO would provide up to $1.15 billion of gross proceeds and enable the company to further chip away at significant debt maturities, Fitch continues to believe Freescale will be challenged to generate free cash flow sufficient to organically meet remaining intermediate-term debt maturities," the company said in a statement.
Any boost in ratings will hinge on Freescale achieving meaningful revenue growth and cash flow over the next few years to reduce debt levels, Fitch said.
The ratings agency currently gives Freescale an issuer default rating of "CCC," which falls into the category of "substantial credit risk" as defined by Fitch's website. The rating opines an entity's relative vulnerability to default on financial obligations, according to Fitch.
Brian Matas, vice president of market research at Scottsdale-based IC Insights, said the IPO may benefit Freescale.
"Anytime you can get some money to maybe help bolster your business or some of the direction you want to go, it's probably a good thing," he said, adding the key will be a successful plan to put its microprocessors into different markets.
Freescale is the largest U.S.-based producer of automotive electronics.
"The automotive market is actually doing pretty well this year," Matas said. "It might be one of the stronger points in the semiconductor industry in terms of end-use applications."
Freescale said it enlisted Citi, Barclays Capital, Credit Suisse, Deutsche Bank Securities and J.P. Morgan to place its stock.
An improving global economy and increased demand for automobiles, networking equipment and consumer electronics helped produce substantially improved fourth-quarter results for Freescale. The company reported in January that operating income was a positive $17 million, compared with a negative $261 million in the fourth quarter of 2009.
Still, restructuring charges of $145 million carved away the profit and left the company with a $102 million net loss for the quarter. That was an improvement, though, over the $114 million loss posted in the same quarter a year earlier. Revenue grew to $1.18 billion from $951 million.
by John Yantis The Arizona Republic Feb. 20, 2011 12:00 AM
Freescale IPO to help pay down debt
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