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Leading semiconductor manufacturer Microchip Technology Inc. (MCHP - Analyst Report) recently closed a new $2 billion credit agreement replacing its erstwhile unsecured credit agreement to increase its borrowing capacity. With this, the company expects to improve its financial flexibility in order to better focus on its operating strategy to reward its shareholders with attractive risk-adjusted returns.

The five-year unsecured credit agreement with a consortium of lenders includes a $1.65 billion revolving loan facility and $350 million term loan option. The debt contract also includes an accordion feature that would enable Microchip to extend the borrowing capacity to $2.3 billion and replaced the existing $750 million unsecured credit agreement.   

Microchip intends to utilize the new credit line to address any general corporate fund requirements, including potential acquisitions and development opportunities in core markets. With better-than-expected bookings and expedite requests in its business, driven by strong demand and robust product designs, Microchip anticipates to continue its bull run in the coming quarters.

Microchip develops and manufacturers microcontrollers, memory and analog and interface products for embedded-control systems, which are small, low-power computers designed to perform specific tasks. Striking features such as quality, performance, reliability, ease of use, pricing and diversity of products have been the forte of Microchip to make it one of the better-positioned companies in the semiconductor universe.

Microchip presently has a Zacks Rank #1 (Strong Buy). Other players in the industry that are worth mentioning include RDA Microelectronics, Inc. (RDA - Snapshot Report), MagnaChip Semiconductor Corporation (MX - Snapshot Report) and MaxLinear, Inc. (MXL - Snapshot Report), each carrying Zacks Rank #2 (Buy).

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