Will Reduce Debt by $250 Million, Increase Shareholders' Equity by $250 Million and Improve Future Cash Flow and Financial Results MIGDAL HAEMEK, Israel, August 20
MIGDAL HAEMEK, Israel, August 20 /PRNewswire-FirstCall/ -- Tower
Semiconductor Ltd. (NASDAQ: TSEM; TASE: TSEM), a pure-play independent
specialty foundry, today announced that it has signed a memorandum of
understanding (MOU) with its lender banks and with Israel Corporation for the
restructuring of the Company's debt, which also includes a commitment by
Israel Corp. for an additional investment in the Company.
According to the MOU, $250 million of Tower's debt to its banks, Bank
Leumi and Bank Hapoalim and Israel Corp., will be converted into equity
capital notes of the Company, exercisable into ordinary shares on the basis
of $1.42 per share. This represents two times the average closing price per
share on NASDAQ for the ten trading days prior to August 7, 2008, which was
the date of the Company's public announcement regarding its debt
restructuring negotiations with the banks and Israel Corp. The conversion of
the debt into equity capital notes reduces Tower's debt by approximately $250
million, increases its shareholders' equity by approximately $250 million, as
well as improves its cash flow margins, statement of operations results and
financial position.
Also under the MOU, Israel Corp. will invest $20 million in Tower in
exchange for 28,169,014 equity capital notes of the Company, exercisable into
ordinary shares of the Company based on the average closing price per share
on NASDAQ for the ten trading days prior to August 7, 2008. Furthermore,
Israel Corp. committed to invest up to an additional $20 million by the end
of 2009, in the event the Company has not raised such amount by the end of
2009 and subject to certain other conditions. In consideration for such
investment, Israel Corp. will receive an amount of equity capital notes of
the Company, exercisable into ordinary shares of the Company, based on the
lower of: (i) the average closing price per share on NASDAQ for the last ten
trading days prior to the date on which the investment is made, or (ii) the
average closing price per share used for the $20 million initial investment
mentioned above.
In addition, the MOU postpones repayment of the remaining principal,
defers interest payments, modifies the interest rate and waives financial
covenants as follows: (i) the repayment of the remaining principal of the
loans is postponed to begin in September 2010; (ii) interest payments
originally due September 2008 through June 2009 are postponed and are added
to the principal payments, which are scheduled to begin in September 2010;
(iii) the interest rate on the remaining bank debt will be LIBOR plus 2.5
percent per annum; and (iv) the banks waived in full the Company's compliance
with financial covenants through the end of 2008.
Russell Ellwanger, Tower's chief executive officer, said, "The debt
restructuring based on twice the market price will significantly improve our
balance sheet, increase our shareholders' equity, improve our position as a
much stronger competitor in the industry and provide a strong base to build
upon with the anticipated closing of the merger with Jazz Technologies.
Israel Corporation, under the leadership of its chairman Idan Ofer, continued
to show its strong belief in Tower, as well as in our dedicated and
professional employees and in the Company's strategy and growth prospects
through its additional investment in Tower and in having been the catalyst
for the bank debt restructure. The resulting capital structure will serve as
an excellent springboard into the future."
The terms of the MOU, excluding the postponed interest payments and the
financial covenants' waiver which are definitive terms, are subject to, among
other conditions, the signing of definitive documentation and the receipt of
certain approvals.
About Tower Semiconductor Ltd.
Tower Semiconductor Ltd. (Nasdaq: TSEM, TASE: TSEM) is an independent
specialty foundry that delivers customized solutions in a variety of advanced
CMOS technologies, including digital CMOS, mixed-signal and RF (radio
frequency) CMOS, CMOS image sensors, power management devices, and embedded
non-volatile memory solutions. Tower's customer orientation is complemented
by its uncompromising attention to quality and service. Its specialized
processes and engineering expertise provides highly flexible, customized
manufacturing solutions to fulfil the increasing variety of customer needs
worldwide. Boasting two world-class manufacturing facilities with standard
and specialized process technologies ranging from 1.0- to 0.13-micron, Tower
Semiconductor provides exceptional design support and technical services to
help customers sustain long-term, reliable product performance, while
delivering on-time and on-budget results. More information can be found at
http://www.towersemi.com.
Forward Looking Statements
This press release includes forward-looking statements, which are subject
to risks and uncertainties. Actual results may vary from those projected or
implied by such forward-looking statements. Potential risks and uncertainties
include, without limitation, risks and uncertainties associated with: (i) the
completion of the equipment installation, technology transfer and ramp-up of
production in Fab 2 and raising the funds therefore, (ii) the cyclical nature
of the semiconductor industry and the resulting periodic overcapacity,
fluctuations in operating results, future average selling price erosion,
(iii) having sufficient funds to satisfy our short-term and long-term debt
obligations and other liabilities, (iv) operating our facilities at high
utilization rates which is critical in order to defray the high level of
fixed costs associated with operating a foundry and reduce our losses, (v)
our ability to satisfy the covenants stipulated in our amended credit
facility agreement, (vi) our ability to capitalize on increases in demand for
foundry services, (vii) meeting the conditions to receive Israeli government
grants and tax benefits approved for Fab2, the possibility of the government
requiring us to repay all or a portion of the grants already received and
obtaining the approval of the Israeli Investment Center for a new expansion
program, (viii) our ability to accurately forecast financial performance,
which is affected by limited order backlog and lengthy sales cycles, (ix)
maintaining existing customers and attracting additional customers, (x) not
receiving orders from our wafer partners and customers, which can result in
excess capacity, (xi) our dependence on a relatively small number of products
for a significant portion of our revenue, (xii) product returns, (xiii) our
ability to maintain and develop our technology processes and services to keep
pace with new technology, evolving standards, changing customer and end-user
requirements, new product introductions and short product life cycles, (xiv)
competing effectively, (xv) our large amount of debt and our ability to repay
our short-term and long-term debt on a timely basis, (xvi) achieving
acceptable device yields, product performance and delivery times, (xvii) our
ability to manufacture products on a timely basis and to purchase the
equipment to increase Fab2 capacity up to 30,000 wafers per month and timely
installation thereof, (xviii) our dependence on intellectual property rights
of others and our ability to operate our business without infringing others'
intellectual property rights, (xix) exposure to inflation, currency exchange
and interest rate fluctuations and risks associated with doing business
internationally and in Israel, (xx) the closing of the definitive agreement
to acquire all of the outstanding shares of Jazz, subject to the approval of
Jazz's shareholders and other customary closing conditions, (xxi) the closing
of the definitive agreement with the lender banks, Bank Hapoalim and Bank
Leumi, and Israel Corporation for the debt restructuring and investment and
(xxii) business interruption due to fire, the security situation in Israel
and other events beyond our control.
A more complete discussion of risks and uncertainties that may affect the
accuracy of forward-looking statements included in this press release or
which may otherwise affect our business is included under the heading "Risk
Factors" in our most recent filings on Forms 20-F, F-4, F-3 and 6-K, as were
filed with the Securities and Exchange Commission and the Israel Securities
Authority. Future results may differ materially from those previously
reported. The Company does not intend to update, and expressly disclaims any
obligation to update, the information contained in this release.
Contact:
Tower Semiconductor
Limor Asif, +972-4-650-6936
Limoras@towersemi.com
or:
Shelton Group
Ryan Bright, +972-239-5119 ext. 159
rbright@sheltongroup.com
SOURCE Tower Semiconductor Ltd
