On March 1, 2009,  Spansion, Inc., (“Spansion”), a manufacturer of semiconductors used to provide “flash memory,” filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  According to its Affidavit in Support of First Day Motions (the “Affidavit”),  Spansion’s chapter 11 bankruptcy includes Spansion Inc., Spansion LLC, Spansion Technology LLC, Spansion International, Inc. and Cerium Laboratories LLC.  Read Spansion’s bankruptcy petition here.

Spansion’s Business

Spansion describes its flash memory semiconductors as a “critical component in a broad range of electronic products including mobile phones, consumer electronics, automotive electronics, networking and telecommunications equipment, data center services, personal computers and PC peripheral applicatons.”  Between 2006 and 2007, Spansion obtained 12 percent market share in the flash memory market.  By 2008, its market share grew to 14 percent.

Located in Sunnyvale, California, Spansion employs 1,800 employees in the U.S. and 6,100 employees through foreign subsidiaries. For the first three quarters of 2008, Spansion lists its sales at $1.8 billion. By the time it filed for bankruptcy, Spansion’s assets totaled $3.8 billion and its liabilities totaled $2.4 billion. One of Spansion’s largest customers, Nokia, accounted for more than 10 percent of its sales in 2007.

Spansion’s Financials

According to Spansion’s Affidavit, its outstanding debt in the weeks prior to bankruptcy totaled $1.23 billion.  Spansions prepetition secured debt consists primarily of a secured credit facility, senior secured floating rate notes and a line of credit with UBS.  Combined, these three debt facilities have a principal balance of $702 million.  Aside from trade debt, Spansion’s unsecured debt totals $457 million (in principal).  Spansion lists its ten largest trade debts as follows:

  1. Tel U.S. Holdings … $49 million
  2. TSMC North America … $13 million
  3. KLA – Tencor California … $11 million
  4. Verigy Ltd. … $10 million
  5. Aehr Test Systems … $9.6 million
  6. Form Factor, Inc. … $8.1 million
  7. Saifun Semiconductors … $7.2 million
  8. Applied Materials … $7.1 million
  9. Winbound Electronics … $5.9 million
  10. Toppan Photomasks … $7.9 million

Events Leading to Bankruptcy

The decline in demand for consumer goods during the Fall of 2008 created a significant reduction in demand for Spansion’s goods.  Spansion’s situation worsened when credit was tightened in 2008, adversely affecting its liquidity.  Combined, the drop in demand and lack of liquidity interferred with Spansion’s ability to fund operations.  Spansion’s bankruptcy is before the Honorable Kevin J. Carey, Chief Judge of the Delaware Bankruptcy Court.