14 DAY TRIAL // Advanced Micro Devices, popularly known as AMD, announced that it will offer convertible senior notes worth $1.5 billion. The company also said that those notes are due in 2012 and that interests will be paid each year on February 15 and August 15 at a rate of 5.75% per year.
According to a company's press release concerning this event, the convertible senior notes are transformable in common stock options at an exchange rate of almost $20.13 per share. AMD estimates that the total sum from these offerings will reach approximately $1,479 million and this after deducting any related expenses. The stated reason of this release is - according to AMD - the payment of the $2.5 billion loan obtained from the firm Morgan Stanley Senior Funding in October 2006 when the hardware manufacturer needed additional funds in order to complete its acquisition of graphics chips producer and vendor ATI.
As AMD's financial status is already in the red zone, the company could surely use some more money in order to be able to repay its long term debts generated by the ATI acquisition. More so, AMD took a serious beating from Intel over the previous six months, mainly because its processors could not compote directly with those made by its rival. The price war led to significant losses for both parties but even more so for AMD, which already had a shaky position both on the hardware market and financially.
After yet another net loss of $600 million posted in July for the entire second quarter of the year, AMD's move to post the senior convertible notes may lead to a series of questions about the company's ability to survive in a direct confrontation with Intel. The senior note is a special kind of bond, as if the issuing company happens to go bankrupt, the senior debt must be paid up front before any another financial obligation. This is not the first release of senior notes from AMD as the company already has a separate offering of $2.2 billion worth of senior notes that were released in April.