AMD Announces Pricing of Private Offering of $500 Million of Senior Notes

[csbin]

http://www.techpowerup.com/201537/a...-offering-of-500-million-of-senior-notes.html


AMD (NYSE: AMD) today announced that it has agreed to sell $500 million aggregate principal amount of its 7.00% Senior Notes due 2024 in a private offering. AMD intends to close the transaction on or around June 16, 2014. AMD estimates that the net proceeds from the issuance and sale of the senior notes (the "Net Proceeds") will be approximately $490 million after deducting the initial purchasers' discounts and estimated offering expenses. AMD intends to use the Net Proceeds to fund the purchase of all 8.125% Senior Notes due 2017 (the "8.125% Notes") that are early tendered (the "Early Tender") in accordance with the terms of a tender offer that was announced earlier today (the "8.125% Tender Offer"). To the extent AMD still has 8.125% Notes outstanding following settlement of the Early Tender, prior to or following the expiration of the 8.125% Tender Offer, AMD intends to use the remaining Net Proceeds to redeem any and all remaining outstanding 8.125% Notes. AMD will use the remaining Net Proceeds after the completion of the 8.125% Tender Offer and any redemption of 8.125% Notes to redeem, repurchase or otherwise retire other outstanding indebtedness.

 

[MisterMac]

Corporate Finance trick to help cashflow or....what's the strategy here?

 

[sm625]

You know there is a problem in the markets when even AMD can borrow at 8%. The fallout from this is going to be spectacular. I give it 5 years max before the Fed starts buying junk bonds.

 

[BrightCandle]

Do they have enough money in the bank to survive until 2024 without a dramatic uptick in their business?

The other question is why they need the money. Typically companies use this sort of financing to buy something big that will grow the capital value of the business, a production line or other such appropriate capital outlay. But in AMDs case do they have such a thing in mind or is just going to wages and their equipment. Because if so its a pretty high risk note with no backing other than a company that is mostly just making a loss for the past decade.

 

[Jimzz]

You know there is a problem in the markets when even AMD can borrow at 8%. The fallout from this is going to be spectacular. I give it 5 years max before the Fed starts buying junk bonds.

Unless I read it wrong its even better than that. They are getting 7% loans to pay back the 8% loans.

I'm a AMD fan but I would be hesitant to invest in AMD right now unless they got a ace up their sleeve they are telling investors about.

 

[DarkKnightDude]

Well, they must be doing something right, I don't understand it.

They've been rehiring people they lost lately, like this guy, so they must be working on something.
http://www.kitguru.net/components/graphic-cards/bob/richard-huddy-rejoins-amd-as-gaming-scientist/

 

[jpiniero]

Do they have enough money in the bank to survive until 2024 without a dramatic uptick in their business?

No, that's why they keep doing this. They sell later expiring bonds to pay for earlier ones since they can't afford to actually pay the principal. And they actually got a better rate! At some point AMD won't be so lucky, but it does give them some more time.

 

[Hitman928]

No, that's why they keep doing this. They sell later expiring bonds to pay for earlier ones since they can't afford to actually pay the principal. And they actually got a better rate! At some point AMD won't be so lucky, but it does give them some more time.

Yep, in a crude comparison, AMD just refinanced their mortgage.

 

[Venomous]

Sounds like they are either bringing in more graphics muscle or taking a completely different road to me. We know on a desktop and mobile processor level they can't compete.

It's scary when you think about it , without the ATI purchase, would and be competing with Intel or a company that vanished?

 

[hungtran]

Without ATI, they would be in better shape in the short run. They wouldn't have taken on so much debt and would still have their foundries. They would have a more competitive CPU but no APUs without a license agreement with Nvidia or ATI.

 

[insertcarehere]

It's just that there is a ton of money going into the credit markets right now, bond spreads are very close to record lows, and every company (especially lesser rated co.s) are taking advantage of this to rollover their debt with low interest rates, I have seen yields in the 5's for companies with negative book equity in the past few months.

 

[hungtran]

As the CFO said in the recent presentation, this 7% 10-year bond has a 5-year call option and they were able to get rid of it at par. The call feature I'm sure increased the rate by a little. Still a good deal as yields have gone up since the announcement last week. By issuing these new bonds, they were also able to have the rating agencies re-rate and upgrade their credit rating to B-. AMD is redeeming the 2017 debt that had 10% interest cost to AMD with OID features. Saves them $3 million a year in interest expenses. He says his focus is to use the money to be more aggressive in the "high-growth" areas. Then he will use AMD's profits to pay down their debt.

 

[Arachnotronic]

Without ATI, they would be in better shape in the short run. They wouldn't have taken on so much debt and would still have their foundries. They would have a more competitive CPU but no APUs without a license agreement with Nvidia or ATI.

Hector Ruiz wrecked a vibrant, technologically interesting company with the foolish acquisition of ATI. There were cheaper/less painful ways to get GPU technology if he really wanted it.

 

[Homeles]

Hector Ruiz was an idiot who wrecked a vibrant, technologically interesting company with the foolish acquisition of ATI. There were cheaper/less painful ways to get GPU technology if he really wanted it.

Yeah, other companies seem to be doing fine licensing PowerVR, Mali, and the like.

I don't know if they've wrecked it, though. I mean, I've heard stories, but on a high level, their graphics department seems to be consistently delivering. They don't have the ambition of Nvidia, but they don't exactly have a coke-powered CEO either.

 

[Ajay]

Yeah, other companies seem to be doing fine licensing PowerVR, Mali, and the like.

I don't know if they've wrecked it, though. I mean, I've heard stories, but on a high level, their graphics department seems to be consistently delivering. They don't have the ambition of Nvidia, but they don't exactly have a coke-powered CEO either.

They already owned mobile graphics technology, Imageon, which they sold to Qualcomm. That could have been incorporated in x86 CPUs if they wanted to. http://www.informationweek.com/desktop/qualcomm-buys-amds-mobile-graphics-division/d/d-id/1075767

 

[tential]

Corporate Finance trick to help cashflow or....what's the strategy here?

It's as plain as it's written there.

They had previously issued debt at 8.125%.

They're now reissuing debt at 7% and using the proceeds to pay off the 8.125% loans. It's all right there. Previous notes had a call option, won't be surprised if these had one as well.

Saves them $6.25 million a year in interest payments(1.25%*500million although obviously who knows how the full details of how they structured their debt). Also is just a general good sign that you're able to borrow at lower rates.

 

[Fox5]

Hector Ruiz wrecked a vibrant, technologically interesting company with the foolish acquisition of ATI. There were cheaper/less painful ways to get GPU technology if he really wanted it.

Not to mention it killed ATI's mobile ambitions, and tied ATI to the train wreck that is AMD.

That said, graphics is the one part of AMD that is strong right now, it's just a shame that the big company became the little company in the most painful way possible.
But without AMD, graphics core next probably wouldn't be what it is, OpenCL probably wouldn't be what it is, and Mantle wouldn't exist.

 

[Arachnotronic]

Not to mention it killed ATI's mobile ambitions, and tied ATI to the train wreck that is AMD.

That said, graphics is the one part of AMD that is strong right now, it's just a shame that the big company became the little company in the most painful way possible.
But without AMD, graphics core next probably wouldn't be what it is, OpenCL probably wouldn't be what it is, and Mantle wouldn't exist.

If I ran AMD, I would stop trying to compete with Intel and I would go all-in on trying to take a big slice of NVIDIA's pie.

AMD's GPU technology is rock solid, and with an additional focus on software, it could be a much bigger player in the high margin segments of the GPU.

 

[Fox5]

If I ran AMD, I would stop trying to compete with Intel and I would go all-in on trying to take a big slice of NVIDIA's pie.

AMD's GPU technology is rock solid, and with an additional focus on software, it could be a much bigger player in the high margin segments of the GPU.

Except AMD already controls at least 1/3 of that market. Even if they got the rest, they'd have to essentially jettison the rest of the company to stay profitable.

 

[Arachnotronic]

Except AMD already controls at least 1/3 of that market. Even if they got the rest, they'd have to essentially jettison the rest of the company to stay profitable.

Do you think AMD's CPU business really has a future? Intel just demo'd a Broadwell SoC in a tablet thinner and lighter than the AMD Discovery Tablet with Mullins.

AMD should basically be GPU + semi-custom house.

 

[Roland00Address]

Do you think AMD's CPU business really has a future? Intel just demo'd a Broadwell SoC in a tablet thinner and lighter than the AMD Discovery Tablet with Mullins.

AMD should basically be GPU + semi-custom house.

(How much of that is the intellectual property that AMD owns and the capability of AMD engineers ) vs (Intel's intellectual property and the capabilities of Intel engineers)

And how much of that is due to the difference between Intel foundries vs AMD foundries (GF and TSMC)

-----

Is any of this going to change in the near future and is any of this is going to change in the far future?

I ask for the true value of the company is its intellectual property and its engineers. Resources such as money and foundries though can sink a company or allow those innate traits to prosper.

AMD can have the best talent in the world, but if the foundries can't deliver it will die. Or AMD can have the worse talent in the world, but the difference between TSMC and Intel shrinks then the difference between Intel and AMD shrinks.

Pretty much I am asking you mentally to draw a graph of AMD future, the assets (talent and ip) are its current value its current dot, what can change in the near future is the direction AMD is heading (foundries, money, talent), and another long term point with the long term data.

-----

It seems you hold no value in AMD cpus. I admit the big cores are practically a lost cause the difference in die size, foundries, and performance between AMD big cores and intel's entire line from celeron to i7 that AMD can't profitably compete here if Intel chooses to win in every market segment. Intel can choose to own the market from top to bottom if they want to, the only reason they don't is that is more profitable not to own the entire market, to give a crappier celeron (that amd can actually compete with) for giving a crappy celeron means you will spend more money on moving up to the $100 i3, or the $150 i5, or the $275 i7.

AMD can compete with the small cores against atom and celeron though. That is if intel decides it does not want to completely sacrifice margins to compete with ARM and the internet of things. Right now Intel in my mind is at a turning point they aren't completely sure they want to go all in with atom and embrace low AOSP to recoup large volume. If Intel does decide to do this then it is bad news for AMD even though AMD is not even particular big interest for Intel.

Pretty much I see AMD future being determined by Intels future and what Intel tries to focus on. Intel has such a large amount of resources, that if chooses to specialize on AMD niche then AMD won't be able to compete. Intel though does not have enough resources to dominate the entire computer market, so there can be a future for AMD if Intel dedicates its resources pursuing markets that AMD is not specialized in and thus AMD can find its own niche.

For example Intel can just throw die space at its graphics and kick AMD butt here (Intel's IP is now at the point it can do so), but Intel does not want to do so for less die space means less profit, and bigger dies means less total foundry utilization. If intel does not have enough foundry space and it does not make enough profit then it can not pursue trying to take over the world in phones and tablets. Hell Intel can go into graphic cards or try to own all flash memory and all ssds if they wanted to, but are those foundries best utilized in pursuing those markets or pursuing computers, servers, tablets, etc?

 

[Phynaz]

It's as plain as it's written there.

They had previously issued debt at 8.125%.

They're now reissuing debt at 7% and using the proceeds to pay off the 8.125% loans. It's all right there. Previous notes had a call option, won't be surprised if these had one as well.

Saves them $6.25 million a year in interest payments(1.25%*500million although obviously who knows how the full details of how they structured their debt). Also is just a general good sign that you're able to borrow at lower rates.

They also extended the length of the loan, which results in paying more for the loan.

 

[Kenmitch]

They also extended the length of the loan, which results in paying more for the loan.

It only takes one really great product to turn around a company....Of course these days it's hard to come up with something that hasn't been done yet.

 

[mrmt]

Right now Intel in my mind is at a turning point they aren't completely sure they want to go all in with atom and embrace low AOSP to recoup large volume. If Intel does decide to do this then it is bad news for AMD even though AMD is not even particular big interest for Intel.

That ship sailed when BK took Intel helm. BK moved Atom to a bleeding edge node and started low-cost/high volume projects like Quark and SoFIA.

 

[Daedalus685]

They already owned mobile graphics technology, Imageon, which they sold to Qualcomm. That could have been incorporated in x86 CPUs if they wanted to. http://www.informationweek.com/desktop/qualcomm-buys-amds-mobile-graphics-division/d/d-id/1075767

Imageon was an ATI brand that came along when AMD bought them. AMD themselves didn't have any GPU IP as far as I know until the ATI purchase. They likely rightly felt they didn't need Imageon for x86 but it has certainly turned into a nice little bit of IP in Adreno and in 10 years might turn out to be the more valuable part of the ATI deal (sold for 1/100 of what they paid for ATI).