Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
(a) On June 20, 2014
(the " Notice Date"), MagnaChip Semiconductor Corporation
(the "Company") received notice of default (the "Notice of Default") from
Wilmington Trust, National Association
, as trustee (the "Trustee"), under that
certain Indenture, dated as of July 18, 2013
, by and between the Trustee and the
Company, as supplemented by that certain First Supplemental Indenture, dated as
of March 27, 2014
(collectively, the "Indenture"), related to the Company's
6.625% Senior Notes due 2021 (the "Notes").
Under Section 4.03 of the Indenture, the Company must file with the Securities
and Exchange Commission
(the "SEC") all quarterly and annual reports on Forms
10-Q and 10-K, and current reports on Form 8-K, that are required to be filed
with the SEC
within the time periods specified in the rules and regulations
applicable to such reports, as such time periods may be extended by Rule 12b-25
or any similar or successor rule of the SEC
. As previously disclosed, the
Company did not timely file with the SEC
its Annual Report on Form 10-K for the
fiscal year ended December 31, 2013
and its Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2014
(collectively, the "Late SEC Reports"),
and has therefore failed to comply with such reporting covenant. Under the
Indenture, the failure of the Company to comply with this covenant, if it
continues for a period of 60 days after the Notice Date (to but not including
August 19, 2014
) (the "Grace Period"), will constitute an Event of Default, as
that term is defined in the Indenture.
If the Company fails to cure the Default (as defined in the Indenture) relating
to the Late SEC Reports during the Grace Period, then the Trustee or the holders
of not less than 25% in aggregate principal amount of the Notes may declare all
the Notes to be due and payable immediately (an "Acceleration"), subject to the
Company's right to elect to pay Additional Interest (as defined below) for up to
180 days as the sole and exclusive remedy for such Event of Default. As of the
Notice Date, there was $225 million
in aggregate principal amount of Notes
The Indenture provides that the Company, in its sole discretion, may elect as
the sole and exclusive remedy for an Event of Default relating to the reporting
obligations of the Indenture to pay additional interest on the Notes at a rate
equal to 0.25% per annum of the principal amount of the Notes (the "Additional
Interest"). This Additional Interest will be payable in the same manner and on
the same dates as the stated interest payable on the Notes. The Additional
Interest will accrue on all outstanding Notes from, and including, the date on
which an Event of Default relating to a failure to comply with the reporting
obligations in the Indenture first occurs (from August 19, 2014
) to, but not
including, the 180th day thereafter (or such earlier date on which the Event of
Default relating to the reporting obligations shall have been cured or waived).
On such 180th day (February 14, 2015
), such Additional Interest shall cease to
accrue and the Notes will be subject to Acceleration as provided above.
If the Company files the Late SEC Reports and files all other SEC
quarterly and current reports that it is required to file with the SEC
expiration of the Grace Period, the Company will have cured such Default and the
Acceleration remedy will not become available. If the Default has not been
remedied prior to the expiration of the Grace Period, the Company intends to
elect to accrue and pay Additional Interest on the Notes for up to an additional
180 days (until February 13, 2015
). If the Company makes this election and files
the Late SEC Reports and files all other annual, quarterly and current reports
that it is required to file with the SEC
prior to the expiration of the 180-day
period, the Company will have cured such Event of Default and the Acceleration
remedy will not become available.
In the event an Acceleration of the Notes were to occur, certain termination and
default rights under the ISDA
master agreements may also become available to the
counterparties to forward and zero cost collar foreign currency hedge contracts
of the Company's Korean subsidiary, which could result in termination of the
contracts prior to the originally intended settlement dates based on prevailing
exchange rates and other market conditions.
The foregoing summary of terms and provisions of the Indenture is qualified in
its entirety by reference to the full text of the Indenture, copies of which are
filed as Exhibit 4.1 and 4.2 to this Current Report.
Item 9.01. Financial Statements and Exhibits.
4.1 Indenture, dated as of July 18, 2013, between MagnaChip Semiconductor
Corporation, as issuer, and Wilmington Trust, National Association, as
trustee (incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed on July 18, 2013).
4.2 First Supplemental Indenture, dated as of March 27, 2014, between
MagnaChip Semiconductor Corporation, as issuer, and Wilmington Trust,
National Association, as trustee.