Want to Buy a Piece of AMD?

AMD's purchase of ATI Technologies last year has set them back a cool $5.4 billion, out of which $2.5 billion they had to borrow from one very wealthy man. But it seems that their recent mishaps have taken their toll over the company's financial status. As the first quarter of 2007 was one of their biggest flops, another problem arose; the debt they had towards ATI didn't get any smaller, and I'm sure that somewhere in the contract they signed there was a policy that outlined what would become of AMD if they couldn't keep their part of the bargain.

Don't want to speculate anymore on that subject, but it has to be really serious, as AMD announced on Monday that they will offer $1.8 billion worth of Convertible Senior Notes to "qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended". These notes can be converted into cash or into shares of AMD's common stock, so basically it's a "legal" cry out for help. The $2.5 billion debt that AMD has to pay back to Morgan Stanley is still due and at least $500 million from the sale of the notes will be used in this purpose.

Anybody can come up to AMD and say "I want to buy some notes from you"; there is no limitation to say, for example, banks or financial institutions. And AMD also expects "to grant to the initial purchasers a 30-day opt to purchase up to $400 million aggregate principal amount of additional notes to cover over allotments". A second announcement came yesterday from AMD in which they managed to get "$2 billion aggregate principal amount of 6.00% Convertible Senior Notes due in 2015 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended." The interest on these notes is to be paid twice a year, on the 1st of May and the 1st of November, at a rate of 6% per year.