Western Digital to Sell Shares in Effort to Reduce Debt : Computers: Irvine company also completed the sale of its chip factory to Motorola for $110.6 million last week.
Chipping away at its debt, Western Digital Corp., a maker of products for personal computers, said it plans to raise additional money in the stock market to pay down its bank loans.
The company also announced last week that it completed the sale of its chip factory to Motorola’s Semiconductor Products Sector for $110.6 million. The deal included a $103.9-million cash payment and a $6.7-million note payable 60 days after closing.
About $95 million of the cash from the sale will be used to retire bank debt, dropping it to $38 million; an additional $59 million in notes also remain. Western Digital has a separate, two-year contract under which Motorola will supply it with semiconductor chips made by the factory in Irvine.
The Motorola transactions are another step in the financial restructuring the company started in 1991, spokesman Robert Blair said. At the time, Western Digital was caught between the onset of the recession and a heavy load of more than $230 million in long-term debt.
The company incurred its debts by building its own 227,000-square-foot semiconductor chip plant, expanding overseas and acquiring new companies in the late 1980s. But as the 1990s brought technological upheavals and economic reversals, the company failed to meet its financial agreements with bankers.
During 1991 the company renegotiated the terms of its loans, and last year it raised $40 million in a secondary public offering of stock, which was used to pay off the banks.
This latest offering of stock will be used to reduce the debt even further. It will also be used for working capital and general corporate purposes.
The company said it filed a statement with the Securities and Exchange Commission for an offering of 6.1 million shares of common stock. Western Digital has 35.3 million shares outstanding.
Western Digital stock closed at $9.125 a share, down 37.5 cents, in New York Stock Exchange trading Monday. At that price, the company offering could raise $45.6 million.
Five million shares are being offered by the company and 1.1 million shares are being offered by institutional warrant holders that received warrants in exchange for forgiving past loans to the company.
Investment banks Kidder, Peabody & Co. and Salomon Bros. Inc. in New York will underwrite the proposed offering. A price for the offering has not yet been determined, and the company said the offering will not become effective until a date to be determined by it and the SEC.
