** Microchip Technology's MCHP.O shares trading around the flat line on very light premarket volume after co secured capital raise to trim debt

** Chandler, Arizona chipmaker early Fri announced pricing offering of $1.35 bln mandatory convertible preferred stock at $50/depositary share

** Preferred stock has annualized dividend yield of 7.5%

** Unless earlier converted by investors, preferred stock will automatically convert on Mar 15, 2028 into between 0.8003 and 0.9804 of MCHP shares, or up to 22.5% premium

** Co to use ~$50 mln of net proceeds to pay for capped calls, derivative transactions used to mitigate share dilution, balance primarily to repay commercial paper

** MCHP's shares on Thurs fell 6.5% to close at $51. That equates to ~3.6% annualized dividend yield and ~$27.4 bln market cap, per LSEG

** Before the bell on Thurs, Moody's downgraded MCHP's senior unsecured rating to Baa2 from Baa1 to reflect a "weak financial profile resulting from a sharp erosion in earnings"

** The rating agency said the convertible refinancing will reduce MCHP's debt leverage by more than 1x to about 5x. It also said overhang from $1.2 bln of notes maturing in Sept 2025 will continue to pressure liquidity

** Earlier this month, co sald it would cut around 2,000 jobs, or about 9% of its workforce, as it grapples with waning demand from automakers

** Through Thurs close, MCHP's shares off 11% YTD compared to 7.6% decline in Philadelphia Semiconductor Index .SOX and 10% drop in S&P 500 Tech sector .SPLRCT

** JP Morgan, BofA and BNP Paribas are lead joint bookrunners for the convertible offering

(Lance Tupper is a Reuters market analyst. The views expressed are his own)

((lance.tupper@tr.com 1-646-279-6380))