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ams Osram announces refinancing plan for large debts used to fund 2020 acquisition

28 Sep 2023

Strategic reorganisation involves €2.25 billion in rights issue plus bonds; firm calls EGM for October 20th.

Photonics and sensing systems giant ams Osram announced today that it plans to strengthen its balance sheet for structural growth targeting investment grade profile. The company plans to secure a total of €2.25 billion ($2.37 billion) through the combination of a capital increase, new corporate bonds, and other financing instruments.

The announcement rapidly follows last week’s news that German and Bavarian public financing totaling €300 million is to be invested in ams Osram's facility in Regensburg.

Aldo Kamper, CEO, stated, “Step by step we deliver what we have outlined. Firstly, we have sharpened our strategy towards structural growth. Secondly, we are cleaning-up our semiconductor portfolio by exiting non-performing businesses. Thirdly, we are making our organization efficient and accountable.

“The foundation for ‘re-establishing the base’ of ams Osram is having a solid and sustainable capital structure. With the holistic financing plan we present today, we aim to put our balance sheet on a solid footing, such that we can fully concentrate on executing our strategy for growth, higher profitability and monetizing innovation,” he said.

Multi-stage plan

The comprehensive financing follows a multi-stage plan: A proposed rights issue in the amount of €800 million will be combined with an issuance of senior unsecured notes in EUR and USD, which are expected to raise a total of around €800 million.

The volume of the capital increase, which is scheduled for approval at an Extraordinary Shareholders meeting on October 20th, 2023, is underwritten by the banks HSBC, Morgan Stanley and UBS.

The total financing package is expected to be completed next year with an additional €350 million in a mix of debt instruments, such as unsecured notes, bi-lateral debt facilities, or other instruments – the mix will be subject to market conditions.

Rainer Irle, CFO, commented, “The multi-element financing plan is designed to strengthen the balance sheet of ams Osram. Our comprehensive plan consists of new equity to reduce gross and net debt as well as new senior notes to refinance additional outstanding debt with a well-balanced maturity profile. We will also use additional financing instruments, such as sale & lease back transactions, with the aim of bringing the company on track to reach a healthy investment grade leverage.”

‘Focusing on intelligent sensors and emitters’

ams Osram stated that the financing plan creates a solid base for the strategic realignment of the company, which is focusing its semiconductor portfolio on its profitable core business with intelligent sensor and emitter components.

The company aims to expand its leading position in the relevant automotive, industrial, and medical sectors. This will be complemented by selected, highly innovative offerings for the consumer electronics markets, such as micro-LED. The statement added that “the Automotive & Specialty Lamps segment continues to be an important part of the Group after its portfolio was cleaned up and is delivering sustainable double-digit pre-tax margins”.

The new strategy and the associated efficiency program ‘Re-establish the Base’ aim to align the Group with the focused semi-conductor portfolio and to strengthen profitability with expected run-rate savings of around EUR 150 million by end of 2025. The company stated that it is “well on the track for achieving this”.

The organizational adjustments to strengthen accountability and to make the set-up leaner (e.g. reducing from 4 to 3 business units) are close to being fully implemented. Preparations are progressing for the exit of the passive optical components business, which is no longer part of the core business. Initial talks with interested parties are promising. Potential proceeds from a sale of the non-core semiconductor portfolio could also be used to reduce leverage.

Further details of the financing plan fall/winter 2023/24 and an associated Extraordinary General Meeting for Rights Issue are available on the company website.

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