Advanced Micro Devices Inc.
) recently announced the pricing of senior unsecured notes
aggregating $500 million. These bonds carry a coupon rate of 7.00%
and are due to mature in 2024. The offering is expected to close on
Jun 16, 2014, subject to customary closing conditions.
Advanced Micro expects to raise $490.0 million from the
transaction. The company stated that the transaction proceeds would
be used for redeeming its outstanding senior unsecured notes,
maturing in 2017. The remaining net proceeds would be used to
redeem, repurchase or otherwise retire other outstanding
Moody's Investor Services - the credit rating agency of Moody's
Corporation - assigned a "B2" rating to the proposed senior notes.
Given the diversification of AMD's business in other growing
markets, Moody's is confident of an improvement in its liquidity
profile. The B2 rating carries a stable outlook.
Moody's anticipates steady revenue growth from semi-custom chips
in the near term driven by design wins and strong demand for
) Xbox and
) PS4 gaming consoles. However, the rating also takes into account
the ongoing weak demand conditions in the personal computer market
due to tablet cannibalization. The ratings also consider increased
) and the weak demand in the server market.
However, a more conducive market, increased game console wins,
adoption of new products, position in graphics and good execution
are expected to pull the company out of the weak PC market.
AMD is the world's second-largest maker of microprocessors. In
the last reported quarter, AMD's top line was better than its
guidance, supported by healthy demand for Radeon GPUs and
semi-custom gaming APUs. Also, the company's bottom line beat the
Zacks Consensus Estimate by a couple of cents.
At quarter-end, the company had cash and short-term investments
balance of $9.02 billion, up from $1.10 billion in the prior
quarter. The company had total debt (short- and long-term) of $2.14
billion on its balance sheet. Additionally, the company paid $200
million cash to GlobalFoundries for the reduction of the "take or
pay" wafer obligation commitments for 2012.
We believe that AMD has a strong balance sheet, which will help
the company to capitalize on investment opportunities and make
strategic acquisitions, further improving its growth prospects. We
believe that the senior notes offering will bring down its cost of
capital, thus strengthening the company's balance sheet and
supporting its future growth.
Currently, AMD has a Zacks Rank #2 (Buy).
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