AMD 2005 Annual Report Download - page 47

Table of Contents
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. We anticipate 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, we pledged our 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. We guaranteed the obligations of AMD
Fab 36 KG to the lenders under the Fab 36 Loan Agreements. We 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, we
have to comply with specified adjusted tangible net worth and EBITDA financial covenants if the sum of our and our 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.
The partnership agreements set forth each limited partner’s aggregate capital contribution to AMD Fab 36 KG and the milestones for such contributions.
Pursuant to the terms of the partnership agreements, AMD, through AMD Fab 36 Holding and AMD Fab 36 Admin, agreed to provide an aggregate of $694
million, Leipziger Messe agreed to provide an aggregate of $237 million and Fab 36 Beteiligungs agreed to provide an aggregate of $143 million. The capital
contributions of Leipziger Messe and Fab 36 Beteiligungs are comprised of limited partnership contributions and silent partnership contributions. These
contributions are due at various dates upon the achievement of milestones relating to the construction and operation of Fab 36. As of December 25, 2005, all
capital contributions were made in full.
The partnership agreements also specify that the unaffiliated limited partners will receive a guaranteed rate of return of between 11 percent and 13 percent
per annum on their total investment depending upon the monthly wafer output of Fab 36. We guaranteed these payments by AMD Fab 36 KG.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006