$189-Million Debt Renegotiated by Western Digital : Financing: Banks give longer repayment period to the computer chip and disk drive maker, which will raise cash with stock offering.
Improving its financial footing, Western Digital Corp. announced Tuesday that it has renegotiated payments with its lenders on $189 million in bank debt and filed papers to raise additional funds in the stock market.
The manufacturer of computer chips and disk drives, based in Irvine, said it reached an agreement with its lenders that gives it more time for repayment of the debt, which Western Digital incurred during brighter economic times in the late 1980s for a manufacturing expansion.
In bank negotiations a year ago, Western Digital was able to set the expiration date of the agreements ahead to June 30, 1993. That meant Western Digital would have had to repay the entire debt by then or run the risk of default.
Under the new deal, Western Digital will make a scheduled $15-million payment by July 1, 1993, but the length of repayment will stretch out to March 31, 1995. After July 1, 1993, Western Digital will make quarterly payments of $5 million each until the new deadline.
The deal is contingent on the successful offering of 5 million additional shares of common stock. At Tuesday’s closing price of $7.50 a share, the company could raise $37.5 million in the offering.
Chairman Roger W. Johnson announced the stock offering at Western Digital’s annual meeting last week. The company filed its registration statement with the Securities and Exchange Commission on Tuesday. The offering is expected to be issued in January.
The offering will be underwritten primarily by First Boston Corp. and Needham & Co., two investment banks in New York. Proceeds from the offering will be used to repay lenders, which include Bank of America and Citibank.
Johnson said last week that he was optimistic about renegotiating the bank debt, which has been a cloud over the company for the last two years, during an extended period of losses. He said the banks had been encouraged by the company’s recent two consecutive quarters of profitability.
