By William Trent, CFA of Stock Market Beat
When a mature business can’t generate enough cash to fund its operations, it usually takes the hint and
Micron Announces Proposed $1.1 Billion Offering of Convertible Senior Notes:
Micron Technology, Inc., (NYSE:MU – News) today announced that it intends to offer, subject to market and other considerations, $1.1 billion aggregate principal amount of unsecured Convertible Senior Notes due June 1, 2014. Micron also intends to grant the underwriters an over-allotment option to purchase up to $165 million aggregate principal amount of additional notes. The interest rate, conversion price and other terms of the notes will be determined by negotiations between Micron and the underwriters. Morgan Stanley & Co. Incorporated will act as sole bookrunning manager for the offering.In connection with this offering, Micron plans to enter into capped call transactions with one or more counterparties, which may include some of the underwriters and/or their affiliates. The capped call transactions are expected to reduce the potential dilution upon conversion of the notes. The capped call transactions are expected to be in three tranches with cap prices ranging from approximately 50% to 100% higher than the closing price of our common stock on the date of pricing.
Micron intends to use a portion of the net proceeds from this offering to pay the cost of the capped call transactions entered into in connection with the offering of the notes. The remaining proceeds from the offering will be used for general corporate purposes, including working capital and capital expenditures.
So, in a one-two punch that almost seems designed solely to infuriate me, Micron is using complex convertible securities, which I consider to be financial sleight-of-hand, so they can keep funding the capex levels I already think are too high. Why can’t they take the hint that there are too many memory chips already, and cut their capex by $1.1 billion instead?
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