AMD 2004 Annual Report Download - page 105

Table of Contents
• AMD Fab 36 KG’s noncompliance with certain financial covenants, including minimum tangible net worth, minimum interest cover ratio, loan to fixed
asset value ratio and a minimum cash covenant.
In general, any default with respect to other indebtedness of AMD or AMD Fab 36 KG that is not cured, would result in a cross-default under the Fab 36
Loan Agreements.
The occurrence of a default under the Fab 36 Loan Agreements would permit the lenders to accelerate the repayment of all amounts outstanding under the
Fab 36 Loan Agreements. In addition, the occurrence of a default under these agreements could result in a cross-default under our loan agreements, including the
indentures governing the Company’s 4.75% Debentures, 4.50% Notes and 7.75% Notes. The Company cannot assure that it would be able to obtain the funds
necessary to fulfill these obligations. Any such failure would have a material adverse effect on the Company.
Generally, the amounts under the Fab 36 Loan Agreements and the partnership agreements are denominated in euros. However, the Company reports these
amounts in U.S. dollars, which are subject to change based on applicable exchange rates. The Company used the exchange rate at December 26, 2004, of 0.739
euro to one U.S. dollar, to translate the amounts denominated in euros into U.S. dollars. However, with respect to amounts for limited partnership and other
equity contributions, investment grants, allowances and subsidies received by AMD Fab 36 KG through December 26, 2004, the Company used historical
exchange rates that were in effect at the time AMD Fab 36 KG received these amounts to convert amounts denominated in euros into U.S. dollars.
July 2003 Spansion Term Loan and Guarantee
Under the July 2003 Spansion Term Loan, as amended, amounts borrowed bear interest at a variable rate of LIBOR plus four percent, which was 5.98
percent at December 26, 2004. Repayment occurs in equal, consecutive, quarterly principal and interest installments ending in September 2006. As of December
26, 2004, $45 million was outstanding under the July 2003 Spansion Term Loan, of which 60 percent is guaranteed by the Company and 40 percent is guaranteed
by Fujitsu. Spansion LLC granted a security interest in certain property, plant and equipment as security under the July 2003 Spansion Term Loan. In addition, as
security for its guarantee obligations, the Company granted a security interest in certain of its assets, including its accounts receivable, inventory, general
intangibles (excluding intellectual property) and the related proceeds.
Pursuant to the terms of the July 2003 Spansion Term Loan, Spansion LLC is required to comply with the following financial covenants during an
enhanced covenant period, which occurs if either Spansion LLC’s net domestic cash balance (as defined in the July 2003 Spansion Term Loan) as of the last day
of any fiscal quarter is below $60 million or if its net worldwide cash balance (as defined in the July 2003 Spansion Term Loan) as of the last day of any fiscal
quarter is below $130 million:
• maintain an adjusted tangible net worth (as defined in the July 2003 Spansion Term Loan) of not less than $850 million;
• achieve EBITDA according to the following schedule:
Period Amount
(in millions)
For the four quarters ending December 2004 $ 550
For the four quarters ending in 2005 $ 640
For the four quarters ending in 2006 $ 800
• maintain a fixed charge coverage ratio (as defined in the July 2003 Spansion Term Loan) according to the following schedule:
Period Ratio
Period ending December 2004 1.0 to 1.00
Full Fiscal Year 2005 1.0 to 1.00
Full Fiscal Year 2006 0.9 to 1.00
100
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005