Micron Shares Climb on Senior Note Offering
TheStreet
Shares of Micron Technology (MU) - Get Report climbed 3.5% to $42.80 Wednesday after the chipmaker announced a debt offering that the company said it plans to use toward funding the purchase of Intel's (INTC) - Get Report non-controlling interest in semiconductor company IM Flash Technologies.
Boise, Idaho-based Micron said it intends to use a "substantial portion" of the proceeds to fund the purchase. Any remaining net proceeds from the offering will be used for general corporate purposes, such as capital expenditures, working capital, and the repayment, repurchase, redemption or other retirement of its other existing debt.
Moody's Investors Service said it rated Micron's two new tranches of senior notes, which are due 2027 and 2030, at Baa3. Moody's said the senior unsecured rating reflects Micron's conservative financial policy of maintaining a net cash leverage position, while producing sizable free cash flow over the long-term. The rating also reflects Micron's substantial scale, Moody's said, with revenue of $27 billion and its number three market position in the memory industry.
"Still, the maintenance of robust liquidity and a conservative financial policy is a requisite of the Baa3 rating given the memory industry's capital intensity and rapid economic obsolescence," Moody's sapd. "Large capital expenditures are necessary to remain competitive in both production technology and chip performance, and to effectively manage highly cyclical demand, which can result in periods of sharp declines in revenues, profit margins, and free cash flow as Micron is experiencing currently."
Intel and Micron initially contributed about $1.2 billion each to set up IM Flash Technologies in 2006. IM Flash makes 3D XPoint used in data centers and high-end computers.
In October, Micron said it planned to buy out Intel share of the flash memory joint venture.