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Spansion Sets Rate on $219 Million Loan to Refinance Debt

Spansion Inc., a provider of flash-memory products, set the interest rate it will pay on a $219 million covenant-lite term loan it’s seeking to refinance debt, according to a person with knowledge of the transaction.

The six-year deal will pay interest at 3.75 percentage points to 4 percentage points more than the London interbank offered rate, said the person, who asked not to be identified because the information is private. Libor, a rate banks say they can borrow in dollars from each other, will have a 1.25 percent floor.

Spansion is proposing to sell the debt at 99.5 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.

Lenders are being offered one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, according to the person.

Leverage, or debt to earnings before interest, taxes, depreciation and amortization, will be 2.8 times total, the person said. The debt is rated Ba3 by Moody’s Investors Service and BB+ by Standard & Poor’s.

Barclays Plc and Morgan Stanley are arranging the financing for Sunnyvale, California-based company, which also includes a $50 million five-year revolving line of credit, according to data compiled by Bloomberg. Commitments are due Dec. 4 at 5 p.m. in New York, the person said.

Spansion’s existing term loan due in 2015 pays interest at 3.5 percentage points more than Libor with a 1.25 percent floor, the data show.

“We are taking advantage of strength in the debt market to ask for more relaxed covenants which in turn provide greater operational and strategic flexibilities.” Michele Landry, a spokeswoman for Spansion, said in an e-mailed statement.

Covenant-lite debt doesn’t carry typical lend protection such as financial-maintenance requirements.

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