AMD is going to borrow another $1.8 - 2.2 billion. Of which half will probably go to Morgan Stanley to pay off the earlier loan:
http://biz.yahoo.com/ap/070423/amd_notes_offering.html?.v=1
Bottomline - AMD's debt rating is going to be almost junk status after this. For all intents and purposes they're borrowing about 1 billion $s probably at a higher rate of interest simpply to part pay a loan they took barely 4 months ago. I thought re-financing works the other way around.
I wouldn't be surprised if the devious b@$#@%&$ at Morgan Stanley buy these notes too and in exchange for a lower interest rate than the market cuts a sweet deal where they end up with a huge stock conversion should AMD slip again. Thereby gaining a significant chunk without having to buy out the existing shareholders.
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Actually I think MS gets $500Mil. Also the offering is 1.8Mil initially with an option for 400Mil more.
And I think AMD's credit rating has achieved junk bond status (someone correct me if I'm wrong). This means much higher interest payments on the new debt.
Also as part of the deal AMD is keeping some of the money to buy back shares to prevent stockholder dilution. The people who take the new convertibles will have the option to convert to shares - this would dilute the current shareholder value, but AMD is (thankfully) reserving money to buy back stock to prevent dilution and keep the share price up in this case.
So bottom line is only a chunk of this 1.8Bil is actually going to be useful to AMD (I think ~1/2 or less).
What should be most amusing to everyone is that all of this is how long after the Q1 conference call where AMD SPECIFICALLY said they were comfortable with their cash flow and would only be worried if it gets to 600Mil? Apparently they were so comfortable they felt the nee to take out an additional 1.8Bil "loan".... why are the analysts not hammering them for their continued misleading (to put it nicely) in these conference calls?
I'll give them one thing - at least they took the debt now! Had they done the usual "everything's rosy" strategic planning and waited until after their Q2 cash reserves got to critical levels they would have probably gotten even worse terms...
The real news is like i pointed out in my blog is the fact that nobody was willing to loan AMD any money. It's the end of the road for creditors for AMD. Any more screw ups would either be more dilution of stocks or chapter 11.
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