The world’s largest semiconductor chip maker, Intel Corporation (NASDAQ:INTC), today announced its intention to sell $1.5 billion principal amount of junior subordinated convertible debentures. The bonds, which would be convertible into shares, aren’t by any measure short-term financing. These Rule 144A notes will mature in 2039 and are to be offered and sold to qualified institutional buyers, Santa Clara, Calif.-based based Intel said in a statement.
The chip maker also said that plans to use most of the funds to buy back an unspecified amount of stock, with the remainder of the proceeds going toward general corporate expenses. Buying back company stock is certainly a positive move on the part of the company since it boosts investors’ confidence. Intel last bought back stock in 2005.
Intel’s offering includes also a provision that grants the initial purchasers of the debt the right to purchase up to an additional $250 million of debentures in case of overallotments. According to the co.’s statement, the interest rate, conversion ratio and other terms will be set by negotiated terms between the company and the initial purchasers of the debentures.
Intel has a market cap of $105+ bln, a $33.6 bln trailing twelve in revs, and more than $11 billion in total cash. Its operating margin stands at mid 7% levels. The company has $1.6 billion of convertible bonds maturing in 2035. Intel last sold bonds worth $1.4 billion in the 4q of 2005.
Intel gained $0.11, or 0.59%, to $18.90 today in Nasdaq trading. Its shares have climbed nearly 30% this year.