AMD Seeking Up To $2.2 Billion From Investors

Advanced Micro Devices, which reported last week a first-quarter loss of $611 million, is seeking up to $2.2 billion from institutional investors to help pay for its loan in buying ATI Technologies, and to cover general corporate expenses.

AMD said Tuesday it is offering $2 billion in convertible notes that would be due in 2015. In addition, the company is granting initial buyers a 30-day option to buy up to $200 million of additional notes to cover over-allotments. Interest on the notes would be paid semiannually on May 1 and Nov. 1 at a rate of 6% per year.

If AMD sells the maximum amount of notes, it expects net proceeds of $2.17 billion. At least $500 million would be used to repay a portion of the ATI loan the company has with Morgan Stanley Senior Funding. AMD paid $5.4 billion last year for the graphics chipmaker.

AMD also expects to use some of the money for general corporate purposes, such as working capital and capital expenditures. As of the end of the first quarter, the company had a $1.2 billion cash reserve, which is $600 million above the company-set minimum.

However, the chip business is expensive. Capital expenditures in the first quarter were $586 million, and the company expects that number to climb to $2 billion by the end of the year.

Following a year of climbing revenue and market share, AMD in the first quarter felt the competitive heat from a re-energized Intel. In addition to reporting a loss, AMD also posted a drop in revenue to $1.23 billion from $1.33 billion the same period last year.

The poor performance was due to "significantly lower" shipments of microprocessors, a drop in average selling prices, and the inclusion of ATI operations, which generally have lower-margin products, for the entire quarter, AMD said.

The dismal financial statement prompted financial analyst Chris Caso of FBR to say in a report that the company was within two quarters of running out of cash.