Conexant to Receive Early Loan Payments
Conexant Systems Inc. said Wednesday that it will receive $140 million in early payments on loans made to a wireless telephone unit it had spun off into a merger last spring. Shares of the Newport Beach communications chip developer rose 22%.
Conexant, which has seen its stock plummet even as it improved sales over the last year, said it should get the money immediately from wireless chip maker Skyworks Solutions Inc.
Skyworks, based in Woburn, Mass., sold $200 million in debt securities Wednesday and said it would use the proceeds to pay down its $215 million in debts to Conexant.
Spokeswoman Lisa M. Briggs said the new bonds and early repayment to Conexant allow Skyworks to save a significant amount in interest.
Conexant’s stock closed up 39 cents at $2.19 on Nasdaq, but it climbed as high as $2.31 during trading Wednesday. It has lost 49% of its value this year.
Analysts see the early payment as a good sign for Conexant.
“Given the status of financial markets, investors might have been concerned about whether Conexant was going to be getting its money back,” said analyst F. Drake Johnstone of Davenport & Co. in Richmond, Va.
Conexant also sold its specialty chip manufacturing plant this year to a joint venture with the Carlyle Group. It is left with a computer, fax and broadband chip business that analysts expect to be profitable by the end of the year and with a money-losing Internet equipment unit called Mindspeed Technologies.
Mindspeed initially was scheduled to be spun off two years ago, but the crash in the semiconductor market forced Conexant to put those plans on the shelf. The unit is still expected to be sold once revenue growth is assured.
“Until they spin off Mindspeed, there won’t be any end to the losses,” said analyst Kalpesh Kapadia of C.E. Unterberg, Towbin in San Francisco.
Skyworks, created by the merger of Conexant’s wireless unit and Alpha Industries Inc., owes Conexant $150 million for a Mexicali, Mexico, manufacturing plant that was part of the merger and $65 million on a $100-million line of credit.
From the proceeds of the debt securities, Skyworks will pay $105 million on the facility and $35 million on the loan. It will pay the rest of the loan by June and has a new note to pay the remaining $45 million on the plant by June 2005.