8-KMaterial AgreementsFinancial EventsSecurities & Listing+2

ADVANCED MICRO DEVICES INC 8-K Report, Material Agreement (Apr 30, 2007)

Filed April 30, 2007For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) announced on April 30, 2007, the successful closing of a significant financing event: the issuance of $2.2 billion aggregate principal amount of 6.00% Convertible Senior Notes due 2015. This offering was made in a private placement to qualified institutional buyers and marks a substantial capital infusion for the company. The net proceeds are earmarked for general corporate purposes, including working capital and capital expenditures, and a portion was used to repay $500 million of an existing term loan related to the ATI Technologies acquisition. Notably, AMD also entered into a capped call transaction to mitigate potential dilution from the convertible notes. This transaction, costing approximately $182 million, is designed to offset dilution if the stock price exceeds the conversion price, up to a cap price. The company has also committed to filing a shelf registration statement to allow for the resale of these notes and their underlying common stock, with penalties for delayed effectiveness. This move indicates a strategic effort to strengthen its financial position and manage its capital structure effectively.

Key Highlights

  • 1AMD issued $2.2 billion in 6.00% Convertible Senior Notes due 2015.
  • 2The notes were issued in a private placement, with net proceeds of approximately $2.169 billion after expenses and commissions.
  • 3$500 million of the proceeds were used to repay a portion of the October 2006 Term Loan.
  • 4A capped call transaction was entered into to mitigate potential dilution from note conversions.
  • 5The initial conversion price of the notes is $28.08 per share, a 100% premium over the April 23, 2007 closing price of $14.04.
  • 6AMD has agreed to file a registration statement for the resale of the notes and underlying common stock, with potential penalties for delays.
  • 7The company expects to use remaining net proceeds for general corporate purposes, including working capital and capital expenditures.

Frequently Asked Questions

This 8-K filing announces the closing of Advanced Micro Devices, Inc.'s (AMD) issuance of $2.2 billion in 6.00% Convertible Senior Notes due 2015. It details the material terms of the notes, the associated capped call transaction, and the use of proceeds.

AMD plans to use the net proceeds for general corporate purposes, including working capital and capital expenditures. Specifically, $500 million was used to repay a portion of the October 2006 Term Loan, and approximately $182 million was used to purchase a capped call transaction to mitigate dilution.

A capped call is a derivative transaction that AMD entered into with Lehman Brothers OTC Derivatives Inc. It is intended to reduce the potential dilution to existing shareholders if the stock price rises significantly and the convertible notes are converted. The transaction has an initial strike price matching the note's conversion price and a cap price, meaning dilution will be limited if the stock price exceeds the cap price.

Yes, the company has agreed to file a shelf registration statement for the resale of the notes and conversion shares. If AMD fails to meet certain deadlines for making the registration statement effective, additional interest will accrue on the notes, starting at 0.25% and potentially increasing to 0.50% per year, until the default is cured.