$600m (+90m) sen unsec cb coming tonight from MS. Terms A:300m, 20 yr, 1.5-2% up 20-25%, s/c btw 3-5 yr@130% (cpn m/whole to 5yr), H?C > 5y, put 7y. B:300m, 20 yr, 1.875%-2.375% up 20-25%, s/c btw 4-6y@130% (cpn m/whole to 6 yr), H?C > 6 yr, put 9y. pctns. UOOP=gcp/stk buy back/hedge. B4 news, smaller $175m exch 1.875% ’27 x/par 1.875% up 55% w/call 4yr, ICS=147bps (35%). In 3 pts not. MU 1.875% 14 becomes cash proxy (-1/8 after news). ICS=L+320 (35%). We’ll use 35 vol. Theo A= 100, B = 98.375. Pure equity (70 bf/130 call). Dont like stucture (said re: FCE/A b4 price) however, name has always been popular. 1x $600m deal would preform better. Stick to A if poss, o/r w/skew technicals but push 4 mids.
Semi memory prods including DRAM, NAND & NOR flash
PF Cash $2.977b
PF Debt $2.172b
LTM EBITDA $3.3b
LTM FCF $1.178b
Leverage 0.7x
Mkt cap = $7.5b
Semi memory is very volatile, currently on strong upswing. MU has rampe up cap spending from $616m FY10, planning to spend $2.9B FY11 & $2B FY12. Generating strong +FCF last 2 years but industry is prone to overexpansion w/large price declines & FCF can quicklytuen negative. Entry into NOR w/2010 acquisition of Numonyx has added diversity & some stability, which will help. Liquidity good w/large cash balance & no significant debt due until 2014. Seven years is a long time in the semi memory biz.
Our assigned spread L+500/550