Western Digital Offering $2.3 Billion of Senior Notes Due 2026

Western Digital Corporation announced concurrent proposed offerings of $2.3 billion aggregate principal amount of senior notes due 2026 and $1.0 billion aggregate principal amount of convertible senior notes due 2024 and, together with the 2026 notes, in each case subject to market and other conditions as further described below.

The notes will be issued by the company, and guaranteed, jointly and severally on a senior basis, by certain of Western Digital’s subsidiaries.

In connection with the offerings of the 2026 notes and the 2024 convertible notes, Western Digital expects to obtain a new $5.022 billion Term Loan A-1 facility maturing 2023, reflecting a $1.0 billion increase in the size of the Term Loan A.

The proceeds of this new Term Loan A-1 facility would be used to settle Western Digital’s existing $4.022 billion Term Loan A maturing in 2021.

In connection with the offerings and the Term Loan A replacement, the firm also expects to extend the maturity of its existing revolving credit facility under its senior credit facilities by approximately two years to a maturity date of 2023, and to seek amendments to its senior credit facilities to, among other things, provide for more covenant flexibility, a decrease in the interest rate applicable to the new Term Loan A-1 facility and/or revolving credit facility and a release of the security and guarantees under certain circumstances.

In the event the full amount of the 2024 convertible notes offering is not completed, Western Digital may further increase the size of the new Term Loan A-1 facility by up to an additional $1.0 billion.

Concurrently with the offerings, the company also expects to commence a cash tender to purchase any and all of its currently outstanding 10.500% senior unsecured notes due 2024.

It expects to offer the 2026 notes in a public offering. The company intends to use the net proceeds of the 2026 notes offering, together with available cash on hand, to fund the tender offer, and if the tender offer is not consummated or if the company purchases less than all of the currently outstanding existing 2024 unsecured notes in the tender offer, to fund the redemption of any existing 2024 unsecured notes that remain outstanding, in each case, including all accrued interest, related premiums, fees and expenses.

BofA Merrill Lynch and J.P. Morgan Securities LLC are acting as lead book-running managers and RBC Capital Markets, Mizuho Securities, Inc. and Wells Fargo Securities are acting as book-running managers for the 2026 notes offering.

The company intends to offer the 2024 convertible notes in a private offering to only qualified institutional investors (QIBs) in accordance with Rule 144A under the Securities Act of 1933, as amended.

In addition, the company expects to grant the initial purchasers a 30-day option to purchase up to an additional $100 million aggregate principal amount of 2024 convertible notes. It intends to use the net proceeds of the 2024 convertible notes offering, together with the net proceeds from the new Term Loan A-1 facility and available cash on hand, to redeem all of its currently outstanding 7.375% senior secured notes due 2023, including all accrued interest, related premiums, fees and expenses. The 2024 convertible notes will be convertible into cash and/or shares of Western Digital’s common stock or a combination thereof at its election. The interest rate, conversion price and other terms of the 2024 convertible notes are to be determined.

The firm expects to repurchase shares of its common stock concurrently with the 2024 convertible notes offering in privately negotiated transactions as well as subsequently through additional share repurchases that will occur after the completion of the 2024 convertible notes offering with available cash on hand. The aggregate amount of these stock repurchases could be up to $500 million.

The 2024 convertible notes, the common stock, if any, deliverable upon conversion of the 2024 convertible notes and the related guarantees have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction. They may not be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration under, or an applicable exemption from, the registration requirements of the Securities Act.

The 2026 notes and 2024 convertible notes offerings are being conducted as separate offerings. Neither offering is contingent upon the other.

Upon successful completion of the transactions described above, WDC expect to reduce total debt outstanding by approximately $1 billion and that it available cash on hand will decrease by approximately $2.4 billion after giving effect to the transactions described above.