AMD 1996 Annual Report Download - page 214

AMD Saxony Manufacturing GmbH (AMD Saxony), a German subsidiary wholly owned by
the Company through a German holding company, is building a 900,000 square foot
submicron integrated circuit manufacturing and design facility in Dresden, in
the State of Saxony, Germany (the Dresden Facility) over the next five years at
a presently estimated cost of approximately $1.5 billion. The Dresden Facility
is being designed for the production of microprocessors and other advanced logic
products. The Federal Republic of Germany and the State of Saxony have agreed to
support the project in the form of (i) a guarantee of 65% of the bank debt to be
incurred by AMD Saxony up to a maximum of DM1.65 billion, (ii) investment grants
and subsidies totaling DM500.5 million, and (iii) interest subsidies from the
State of Saxony totaling DM300 million. In March, 1997 AMD Saxony will be
entering into a loan agreement with a consortium of banks led by Dresdner Bank
AG under which facilities totaling DM1.65 billion will be made available. In
connection with the financing, the Company has agreed to invest in AMD Saxony
over the next three years equity and subordinated loans in an amount totaling
approximately DM507.5 million. Until the Dresden Facility has been completed,
AMD has also agreed to guarantee AMD Saxony's obligations under the loan
agreement up to a maximum of DM217.5 million. After completion of the Dresden
Facility, AMD has agreed to make available to AMD Saxony up to DM145 million if
the subsidiary does not meet its fixed charge coverage ratio covenant. Finally,
AMD has agreed to undertake certain contingent obligations, including various
obligations to fund project cost overruns. The Company began site preparation of
the Dresden Facility in the fourth quarter of 1996, and plans to commence
construction during the second quarter of 1997. The planned Dresden Facility
costs are denominated in deutsche marks and, therefore, are subject to change
due to foreign exchange rate fluctuations. The Company plans to hedge future
foreign exchange exposure for the Dresden Facility.
The Company's total cash investment in FASL was $160 million at the end of 1996
and at the end of 1995. No additional cash investment is currently planned for
1997. In March of 1996, FASL began construction of a second Flash memory device
wafer fabrication facility (FASL II) at a site contiguous to the existing FASL
facility in Aizu-Wakamatsu, Japan. The facility is expected to cost
approximately $1.1 billion when fully equipped. Capital expenditures for FASL II
construction are expected to be funded by cash generated from FASL operations
and, if necessary, borrowings by FASL. To the extent that FASL is unable to
secure the necessary funds for FASL II, AMD may be required to contribute cash
or guarantee third-party loans in proportion to its percentage interest in FASL.
At December 29, 1996, AMD had loan guarantees of $39 million outstanding with
respect to such loans. The planned FASL II costs are denominated in yen and,
therefore, are subject to change due to foreign exchange rate fluctuations.
In August, 1996, the Company sold $400 million of Senior Secured Notes due
August 1, 2003 under its shelf registration declared effective by the Securities
and Exchange Commission on May 17, 1994. Due to the sale of the Senior Secured
Notes, the Company fully utilized this shelf registration. Interest on the
Senior Secured Notes accrues at the rate of 11 percent per annum and is payable
semiannually in arrears on February 1 and August 1 of each year, commencing
February 1, 1997. The Senior Secured Notes are secured by substantially all of
the assets of Fab 25 and its ancillary facilities, and are redeemable at the
Company's option after August 1, 2001.
The net proceeds to the Company from the sale of Senior Secured Notes, after
deducting underwriting discounts and commissions and estimated expenses of the
sale of Senior Secured Notes, were approximately $389 million. The Company used
$150 million of the net proceeds to repay its existing four-year term bank loan
which was to mature on January 5, 1999. The Company expects to use the balance
of the net proceeds of approximately $239 million for general corporate
purposes.
On July 19, 1996, the Company entered into a syndicated bank loan agreement (the
Credit Agreement) which provides for a new $400 million term loan and revolving
credit facility which became available concurrently with the sale of the Senior
Secured Notes. The Credit Agreement replaced the Company's unsecured and unused
$250 million line of credit and its unsecured $150 million four-year term loan.
The Credit Agreement provides for a $150 million three-year secured revolving
line of credit (which can be extended for one additional year, subject to
approval of the lending banks) and a $250 million four-year secured term loan
which the Company fully utilized in January, 1997. Additionally, as of December
29, 1996, the Company has available unsecured uncommitted bank lines of credit
in the amount of $85 million, of which $15 million was utilized.
The Company believes that current cash balances, together with cash flows, will
be sufficient to fund operations and capital investments currently planned
through 1997.
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Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997