Cypress (CY) Prices $250M Senior Notes In Private Offering

Cypress Semiconductor Corporation (NASDAQ:CY) recently announced the pricing of convertible senior unsecured notes aggregating $250 million in a private placement. These bonds carry a coupon rate of 4.50% per year and are due to mature on Jan 15, 2022.

The notes have been offered to qualified institutional buyers only, and in accordance with Rule 144A under the Securities Act of 1933, as amended. The company also granted initial purchasers of the notes an option to buy up to an additional $37.5 million aggregate principal amount of the notes to cover any over-allotments. This option is exercisable for 13 days.

Interest on the notes will be paid semi-annually on Jan 15 and Jul 15 of every year, starting Jan 15, 2017. The offering is expected to close on Jun 23, 2016, subject to customary closing conditions.

Cypress plans to use the proceeds from these offerings as well as the additional $450.0 million term loan under its existing credit facility to fund the capped call transactions with initial purchasers, their affiliates or other financial institutions. Additionally, the proceeds will be used to pay the cash component and other expenses associated with the previously announced acquisition of Broadcom Corporation (NASDAQ:AVGO)'s Wireless Internet of Things business. The remaining proceeds will be used to repay approximately $107.0 million in revolving loans and related fees and expenses.

Cypress is a semiconductor company that offers high performance, mixed signal and programmable solutions. The company reported a decent quarter with the top line missing the Zacks Consensus Estimate but the bottom line exceeding the same.

Exiting the first quarter, Cypress had cash and short-term investments of approximately $87.1 million against $227.6 million in the last quarter. Cash flow from operations was roughly $13.7 million and capex was $13.0 million. The company also paid a quarterly dividend worth $36.6 million.

We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving its growth prospects. Moreover, we believe that the senior notes offering will bring down the company’s cost of capital, thus strengthening its balance sheet and supporting growth.

Currently, Cypress has a Zacks Rank #3 (Hold). Some stocks that have been performing well are DSP Group Inc. (NASDAQ:DSPG) , Applied Materials Inc. (NASDAQ:AMAT) and Advanced Energy Industries, Inc. (NASDAQ:AEIS) . Each of these stocks carries a Zacks Rank #1 (Strong Buy).