What is the main purpose of the amendment to the Term Loan Facility Agreement?

The main purpose of the amendment is to provide AMD and its subsidiary AMD Fab 36 KG with increased financial flexibility. This includes allowing the subsidiary to borrow in U.S. Dollars under certain conditions and revising financial covenants for both the subsidiary and the parent company, contingent on liquidity and creditworthiness.

What are the key conditions for AMD Fab 36 KG to borrow in U.S. Dollars?

AMD Fab 36 KG can borrow in U.S. Dollars as long as AMD's group consolidated cash (unsecured cash, cash equivalents, and short-term investments less revolving credit facility usage) is at least $500 million. However, if consolidated cash falls below $1 billion or AMD's credit rating drops below B3 (Moody's) or B- (S&P), the subsidiary will be required to maintain a cash reserve account for U.S. Dollar loans.

How have the financial covenants for AMD been revised?

The financial covenants for AMD, specifically regarding 'adjusted tangible net worth' and 'EBITDA', have been revised. The definition of 'adjusted net earnings from operations' now excludes certain equity compensation expenses and Spansion Inc. equity. The required levels for both adjusted tangible net worth and EBITDA are now tiered and dependent on AMD's group consolidated cash levels and its credit ratings from Moody's and Standard & Poor's.

What is the immediate financial impact of this filing for AMD?

The immediate financial impact is the draw of $645 million by AMD Fab 36 KG under the amended facility. This incurs an interest expense, with an approximate $12 million interest payment due on January 16, 2007. The filing also outlines a structured repayment plan for this principal amount over the next few years.

AMD 8-K: Material Agreements & Financial Events

Summary

This 8-K filing by Advanced Micro Devices, Inc. (AMD) details an amendment to its existing EUR 700 million Term Loan Facility Agreement, primarily impacting its subsidiary AMD Fab 36 KG. Key changes include allowing AMD Fab 36 KG to borrow in U.S. Dollars under certain consolidated cash conditions and easing certain financial covenants for both the subsidiary and AMD, contingent on consolidated cash levels and credit ratings. These amendments aim to provide greater financial flexibility while introducing revised debt-to-asset ratios for the subsidiary and adjusted tangible net worth and EBITDA requirements for AMD. The filing also announces that AMD Fab 36 KG has drawn $645 million under this amended facility, with an interest rate of 7.1259% for a three-month period, and an interest payment of approximately $12 million due in January 2007. The repayment schedule for this new loan is also outlined, with principal repayments commencing in September 2007. These actions suggest proactive capital management and debt financing strategies by AMD to support its operations and growth initiatives.

Key Highlights

1AMD amended its EUR 700 million Term Loan Facility Agreement, allowing its subsidiary AMD Fab 36 KG to borrow in USD if group consolidated cash exceeds $500 million.
2The amendment revises financial covenants for AMD Fab 36 KG, easing minimum cash balance requirements and introducing a new loan-to-fixed asset value covenant with tiered percentages.
3AMD's consolidated cash levels and credit ratings (Moody's B3, S&P B-) are now key determinants for the subsidiary's ability to borrow in USD and for triggering reserve account requirements.
4The Guarantee Agreement was amended, revising financial covenants for AMD concerning 'adjusted tangible net worth' and 'EBITDA', with new levels contingent on consolidated cash and credit ratings.
5AMD Fab 36 KG drew $645 million under the amended facility at an interest rate of 7.1259% for a three-month period.
6An interest payment of approximately $12 million is due on January 16, 2007, for the $645 million loan.
7A detailed principal repayment schedule for the $645 million loan is provided, starting September 30, 2007, and concluding March 31, 2011.

ADVANCED MICRO DEVICES INC 8-K Report, Material Agreement (Oct 19, 2006)

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