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AMD to issue $2.2 billion USD in Convertible Senior Notes

AMD is a company that has been strapped for cash lately. In late April, the Sunnyvale, CA based company announced that it would offer Convertible Senior Notes to raise around $2.2 billion USD. AMD set a conversion point of $42.12 USD per share at a time when its stock price was $14 USD.

The company's efforts to raise more cash have intensified even further. Yesterday, AMD priced an additional $1.5 billion USD in Convertible Senior Notes at a conversion point of $20.13 USD per share. The conversion price represents a 50 percent premium over AMD's $13.42 USD stock price at close of day on August 8.

AMD plans to use the funds received from the offering to pay an outstanding balance on a loan from Morgan Stanley Senior Funding in late 2006. The company borrowed around $2.5 billion USD in loans and $1.2 billion USD in common stock to fund the $5.4 billion purchase of ATI Technologies. The company also reported a net loss of $600 million USD last quarter while archrival Intel reported net income of $1.3 billion USD.

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By crystal clear on 8/11/2007 3:44:59 AM , Rating: 3
Its important to note the following-

1) AMD (said-as in the previous issues $2.2 billion)it would enter into capped call transactions in connection with the offering, a move intended to reduce the potential dilution to common stockholders if the notes are converted into shares.

2) In the last issue(2.2bl) S&P said this-

Credit rating agency Standard & Poor's downgraded the company on Monday to "B," its fifth-highest "junk" grade, from "B-plus," with a negative outlook. S&P said the downgrade reflected "recent subpar execution of (AMD's) business plans" and a more difficult market environment
(note this comment very carefully-subpar execution fo AMDs business plans.)

To add more sting to this rating-Read this

Aug 7 - A new study by Standard & Poor's Ratings Services confirms earlier findings that CreditWatch and rating outlooks provide powerful signals of future rating changes The report, titled "CreditWatch And Rating Outlooks Provide Powerful Warning Signals," published earlier today on RatingsDirect, includes the first published analysis of CreditWatch performance for Structured Finance ratings.

In recent years, ratings in this sector have experienced increased volatility, and market participants are more sensitive to potential rating changes. In this more volatile environment, CreditWatch placements have increased significantly, providing credit signals on the near-future movements of Structured Finance ratings.

"Investors and other market participants who try to anticipate rating actions can use these indicators as valuable predictors of ratings behavior," said Standard & Poor's managing director Gail Hessol. CreditWatch listings and rating outlooks add meaningful incremental information to the analysis of credit migrations.

3) It must fund a capacity expansion plan that will cost it $2 billion this year alone.(Asset lite is not the solution-its a stop gap measure)

4) It also has to buy expensive new production technology to keep up with Intel's upgrades as well as develop new processors to compete with more powerful and efficient ones coming out of its competitor's labs.

5) Revenue is under pressure amid a price war, which is getting bad to worse on AMD until it debuts its new high-end chip called ...........etc
"That is ofcourse if it meets the expectations(hype) built around it by AMD".

"That is ofcourse if it sells enough against the Intel offerings".

All hangs/depends on the word "IF"-NO guarrantees of success.

In short its a very bad business climate (created by AMD itself) to operate in.

You cannot go on for a long time this way-there is a limit on how much you can borrow from the market.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke
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