NXP has decided to draw down the last of its revolver credit facility - another $200m to add to the $400m it took in late November.
"In view of the continuing global financial turmoil we are drawing USD 200 million under our revolving credit facility. This is a proactive financial decision in order to secure availability of this facility in a turbulent financial market environment," said NXP CFO Karl-Hendrik Sundstrom.
For the bondholders, some of whom are seeing their debt being sold for around 27 cents on the dollar, this is an alarming development because, despite Sundstrom's implication that the draw-down is to ensure NXP gets the money in case of a banker's default, the alternative could just be that NXP is getting through cash at this considerable rate.
The Zero Hedge blog suggests that the value of the bonds will go down further as a result of this move.
At, say, ten cents on the $, NXP could buy back the bonds for $600m and wipe out the requirement to pay annual interest charges of $480m.
However there is another interpretation of NXP's latest debt draw-down. Zero Hedge says: 'Traditionally pre-emptive bank runs of this nature are indicative of something more troubling. Maybe the company has realized that the likelihood of raising a DIP is negligible.' Debtor In Possession financing is finance for companies which are in administration.
If the management is considering an administration in which the profitable parts of the company have pre-arranged acquirers on a debt-free basis, while the unprofitable parts are saddled with all the debt, then the bondholders must be getting worried.
Tomorrow, on Mannerisms: Ten Point Plan To Revive NXP