AMD passes the collection plate again

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. ®