Microsemi Corp., a maker of microchips for the aerospace and defense industries, lowered the rate it will pay on a $726 million term loan and removed financial covenants from the deal, according to a person with knowledge of the transaction.

The interest rate on the debt that now matures in 2020 will be reduced to 2.75 percentage points more than the London interbank offered rate and the loan will be sold at par, 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 percent floor.

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.

Morgan Stanley is arranging the transaction and commitments are due Feb. 5, the person said. The debt is rated Ba2 by Moody’s Investors Service and BB by Standard & Poor’s.

The company’s existing term loan pays interest at 3 percentage points more than Libor with a 1 percent floor, according to data compiled by Bloomberg. The debt was quoted at 101.875 cents today, the data show.

John Hohener, chief financial officer of Microsemi, didn’t immediately respond to an e-mail seeking comment.

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

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