AMD passes the collection plate again
Brother, could you spare $1.5bn?
AMD is hoping to keep the debt collector at bay by selling $1.5bn worth of convertible senior notes.
The company will use the money, along with cash on hand, to repay the outstanding balance on a $2.5bn loan obtained from Morgan Stanley Senior Funding back in October 2006 to acquire ATI.
AMD will give the initial purchaser a 30-day option to buy up to an additional $225m worth of notes, which could bring the sum raised to $1.725bn. The company intends to use the additional money for general corporate purposes such as working capital and expenditures.
The notes, which are due 2012, will be convertible into shares of stock based on the conversion rate of about 49.7 shares per $1,000 in notes. It's equivalent to $20.13 per share, which is a 50 per cent premium from the last reported sale of stock yesterday at $13.42 per share.
It's no secret that AMD could use the money. The company has taken a beating in recent months by chip megalith Intel, and has struggled to generate cash and finance its long-term debt. In July, AMD posted a Q2 net loss of $600m. But the nature of senior notes may raise some eyebrows.
A senior note is a type of bond available only to qualified institutional buyers. In the event the company goes bankrupt, senior debt must be paid before other creditors receive any money.
In April, AMD closed a separate offering of $2.2bn worth of senior notes. The company has also pledged to cut costs across the company, including slowing fab work and reducing the headcount. ®
It Certainly Figures....
Jerry Sanders has aways been a staunch supporter of slamming and ridiculing Intel. I know this as I once worked at the pathetic place. Well Jerry, what do you have to say now? You brought in YOUR Lord and savior- Hector Ruiz and looks like your ignorant move has resulted in driving your company DEEPER in debt- LOL!!! I'm glad I sold my stock and haven't looked back! Anyone out there with AMD stock, you HAD BEST sell it or you'll be in the red like AMD and er, uh SPANSION! Looks like Intel is hammering your spin off company into the ground also. Maybe Samsung will help Spansion out? ;-)
What AMD REALLY stands for:
Bringing Hector Ruiz on board has proven to be another kick-in-the-balls for Jerry and the poor souls that are STILL working/supporting/caring for AMD. They (share holders, engineers, etc.) ought to jump ship and start their own chip manufacturing company or go to work for Intel. Speaking of such, this also holds the same for Spansion, LLC in Austin, TX. Between Intel and Samsung, that "mirror flash" is getting stomped on BIG TIME. IBM OUGHT to take them over... at least IBM has been making money. WHat has AMD/Spansion been doing- blowing it and screwing the little people that have been faithful and supportive of them for sooooo long. Way to go Jerry!
Time for Debt
"It does seem that AMD has taken up higher debt at a time when interest rates are on the rise and the dollar is falling (I'm not sure what the effect of the latter is, but I suspect that it's not good overall)"
I'm not an MBA, but it seems like the time to take higher debt is when interest rates are on the rise. The alternative is after they've risen.
As far as the dollar, I'd think that probably helps them. (As long as the debt is in dollars.)