AMD 2004 Annual Report Download - page 100

Table of Contents
Dresden Loan Agreements, as of December 26, 2004 the Company had provided $192 million of subordinated loans and $286 million of equity investments in
AMD Saxony. These amounts have been eliminated in our consolidated financial statements.
In addition to support from the Company, the consortium of banks referred to above made available approximately $1.0 billion in loans to AMD Saxony to
help fund Fab 30 project costs. The loans have been fully drawn. On November 2, 2004, AMD Saxony prepaid the full amount outstanding under the Dresden
Term Loans plus accrued and unpaid interest and a prepayment premium. The Dresden Loan Agreements were terminated effective December 23, 2004. The
Company recognized an approximately $14 million loss (included in interest income and other, net) associated with the prepayment of the Dresden Term Loan,
which included the prepayment premium of approximately $8.5 million and write-off of remaining capitalized financing costs of approximately $5.3 million.
Under the Dresden Loan Agreements, AMD Saxony and its limited partners were prevented from paying dividends or making other payments to us. In
addition, the Dresden Loan Agreements, as amended, also required that the Company:
• provide interim funding to AMD Saxony if either the remaining capital investment grants and allowances or the remaining interest subsidies are
delayed, such funding to be repaid to AMD, as AMD Saxony receives the investment grants and allowances or subsidies from the State of Saxony and
the Federal Republic of Germany;
• fund shortfalls in government subsidies resulting from any default under the Subsidy Agreement caused by AMD Saxony or its affiliates; and
• guarantee up to 50 percent of AMD Saxony’s obligations under the Dresden Loan Agreements, which guarantee must not be less than $151 million or
more than $406 million, until the bank loans are repaid in full.
Due to the full repayment of the outstanding amount under the Dresden Term Loan on November 2, 2004 and the termination of the Dresden Loan
Agreements effective December 23, 2004, the above restrictions were no longer effective as of December 26, 2004.
Pursuant to a Subsidy Agreement the Federal Republic of Germany and the State of Saxony are supporting the Fab 30 project, in accordance with the
Dresden Loan Agreements, in the form of:
• guarantees equal to 65 percent of the amount outstanding under the Dresden Term Loan, which was zero as of December 26, 2004;
• capital investment grants and allowances totaling approximately $493 million as of December 26, 2004; and
• interest subsidies totaling $208 million as of December 26, 2004.
Of these amounts, AMD Saxony received approximately $411 million in capital investment grants and allowances and $153 million in interest subsidies
through December 26, 2004. AMD Saxony also received $58 million in research and development subsidies through December 26, 2004. Amounts received
under the Subsidy Agreement are recorded as a long-term liability on the Company’s financial statements and are amortized to operations ratably over the
contractual life of the Subsidy Agreement as a reduction to operating expenses. As of December 26, 2004, these amounts were being amortized ratably through
December 2007. AMD Saxony has received substantially all investment grants and allowances and interest subsidies to which it is entitled. Noncompliance with
the conditions of the grants, allowances and subsidies contained in the Subsidy Agreement could result in the forfeiture of all or a portion of the future amounts
to be received, as well as the repayment of all or a portion of amounts received to date.
Under the original Subsidy Agreement, AMD Saxony undertook to attain a certain employee headcount by December 2003 and to maintain such
headcount until December 2008. In April 2004, the German governmental
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005