AMD 2005 Annual Report Download - page 121

Table of Contents
AMTC and BAC Guarantees
The Advanced Mask Technology Center GmbH & Co. KG (AMTC) and Maskhouse Building Administration GmbH & Co., KG (BAC) are joint ventures
formed by AMD, Infineon Technologies AG and DuPont Photomasks, Inc. for the purpose of constructing and operating an advanced photomask facility in
Dresden, Germany. In April 2005 DuPont Photomasks, Inc. was acquired by Toppan Printing Co., Ltd. and became a wholly owned subsidiary of Toppan, named
Toppan Photomasks, Inc. The Company procures advanced photomasks from AMTC and uses them in manufacturing its microprocessors. To finance the project,
BAC and AMTC entered into a $142 million revolving credit facility and a $89 million term loan in December 2002. Also in December 2002, in order to occupy
the photomask facility, AMTC entered into a rental agreement with BAC. With regard to these commitments by BAC and AMTC, as of December 25, 2005, the
Company guaranteed up to $38 million plus interest and expenses under the revolving loan, and up to $19 million, initially, under the rental agreement. The
obligations under the rental agreement guarantee diminish over time through 2011 as the term loan is repaid. However, under certain circumstances of default by
the other tenant of the photomask facility under its rental agreement with BAC and certain circumstances of default by more than one joint venture partner under
its rental agreement guarantee obligations, the maximum potential amount of the Company’s obligations under the rental agreement guarantee is $119 million.
As of December 25, 2005, $83 million was drawn under the revolving credit facility, and $57 million was drawn under the term loan. The Company has not
recorded any liability in its consolidated financial statements associated with the guarantees because they were issued prior to December 31, 2002, the effective
date of FIN 45.
Spansion Japan Term Loan and Guarantee
As a result of the formation of Spansion LLC on June 30, 2003, the third-party loans of FASL were refinanced from the proceeds of a term loan entered
into between Spansion Japan, which owns the assets of FASL, and a Japanese financial institution. Under the agreement, the amounts borrowed bear an interest
rate of TIBOR plus a spread that is determined by Fujitsu’s current debt rating and Spansion Japan’s non-consolidated net asset value as of the last day of its
fiscal year. Repayment occurs in equal, consecutive, quarterly principal installments ending in June 2007.
Fujitsu guaranteed 100 percent of the amounts outstanding under this facility. The Company agreed to reimburse Fujitsu 60 percent of any amount paid by
Fujitsu under its guarantee of this loan. As of December 25, 2005, $72 million was outstanding under this term loan agreement. Spansion Japan’s assets are
pledged as security for its borrowings under this agreement.
Spansion Capital Lease Guarantee
The Company guaranteed certain capital leases entered into by Spansion and its subsidiaries totaling $35 million as of December 25, 2005. The amounts
guaranteed are reduced by the actual amount of lease payments paid by Spansion over the lease terms.
Spansion LLC Operating Lease Guarantees
The Company has guaranteed certain operating leases entered into by Spansion and its subsidiaries totaling $7 million as of December 25, 2005. The
amounts guaranteed are reduced by the actual amount of lease payments paid by Spansion over the lease terms.
No liability has been recognized for these guarantees related to Spansion under the provisions of FIN 45 because the Company concluded the fair value of
the guarantees is not significant after considering various factors including the recent IPO of Spansion, its credit rating, the ability of Spansion to make the
payments on these obligations and the short maturity of the indebtedness.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006