AMD 2005 Annual Report Download - page 106

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Table of Contents
As of December 25, 2005, the Company had contributed to AMD Fab 36 KG the full amount of equity required under the partnership agreements and no
loans were outstanding. These amounts have been eliminated in our consolidated financial statements.
On April 21, 2004, AMD, AMD Fab 36 KG, AMD Fab 36 LLC, AMD Fab 36 Holding GmbH, a German company and wholly owned subsidiary of AMD
that owns substantially all of the Company’s limited partnership interest in AMD Fab 36 KG, and AMD Fab 36 Admin GmbH, a German company and wholly
owned subsidiary of AMD Fab 36 Holding that owns the remainder of the Company’s limited partnership interest in AMD Fab 36 KG, (collectively referred to
as the AMD companies) entered into a series of agreements (the partnership agreements) with the unaffiliated limited partners of AMD Fab 36 KG, Leipziger
Messe and Fab 36 Beteiligungs, relating to the rights and obligations with respect to their limited partner and silent partner contributions in AMD Fab 36 KG.
The partnership has been established for an indefinite period of time. A partner may terminate its participation in the partnership by giving twelve months
advance notice to the other partners. The termination becomes effective at the end of the year following the year during which the notice is given. However, other
than for good cause, a partner’s termination will not be effective before December 31, 2015.
Also on April 21, 2004, AMD Fab 36 KG entered into a term loan agreement and other related agreements (the Fab 36 Loan Agreements) with a
consortium of banks led by Dresdner Bank AG, a German financial institution, to finance the purchase of equipment and tools required to operate Fab 36. The
consortium of banks agreed to make available up to $831 million in loans to AMD Fab 36 KG upon its achievement of specified milestones, including attainment
of “technical completion” at Fab 36, which requires certification by the banks’ technical advisor that AMD Fab 36 KG has a wafer fabrication process suitable
for high-volume production of advanced microprocessors and has achieved specified levels of average wafer starts per week and average wafer yields, as well as
cumulative capital expenditures of approximately $1.2 billion. Although AMD Fab 36 KG attained these milestones in January 2006, several conditions must
still be fulfilled before AMD Fab 36 KG can draw on the loans. The Company anticipates that these conditions will be fulfilled in 2006. The amounts borrowed
under the Fab 36 Loan Agreements are repayable in quarterly installments commencing in September 2007 and terminating in March 2011.
AMD Fab 36 KG pledged substantially all of its current and future assets as security under the Fab 36 Loan Agreements, the Company pledged its equity
interest in AMD Fab 36 Holding and AMD Fab 36 LLC, AMD Fab 36 Holding pledged its equity interest in AMD Fab 36 Admin and its partnership interest in
AMD Fab 36 KG and AMD Fab 36 Admin and AMD Fab 36 LLC pledged all of their partnership interests in AMD Fab 36 KG. AMD guaranteed the
obligations of AMD Fab 36 KG to the lenders under the Fab 36 Loan Agreements. (See Note 13). AMD also guaranteed repayment of grants and allowances by
AMD Fab 36 KG, should such repayment be required pursuant to the terms of the subsidies provided by the federal and state German authorities. Pursuant to the
terms of the guarantee, the Company has to comply with specified adjusted tangible net worth and EBITDA financial covenants if the sum of the Company’s and
its subsidiaries’ cash, cash equivalents and short-term investments, less the amount outstanding under any third-party revolving credit facility or term loan
agreement with an original maturity date for amounts borrowed of up to one year (group consolidated cash), declines below the following amounts:
Amount
(in thousands)
if Moody’s
Rating is at least
if Standard & Poor’s Rating
is at least
$500,000 B1 or lower and B+ or lower
425,000 Ba3 and BB-
400,000 Ba2 and BB
350,000 Ba1 and BB+
300,000 Baa3 or better and BBB-or better
As of December 25, 2005, group consolidated cash was greater than $500 million, and therefore, the preceding financial covenants were not applicable.
101
Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006