AMD 2008 Annual Report Download - page 91

Pursuant to the terms of the partnership agreements and subject to the prior consent of the Federal Republic of
Germany and the State of Saxony, AMD Fab 36 Holding and AMD Fab 36 Admin have a call option over the
limited partnership interests held by Leipziger Messe, first exercisable three and one-half years after Leipziger
Messe has completed its capital contribution and every three years thereafter. In addition, AMD Fab 36 Holding and
AMD Fab 36 Admin had the same call option rights over the partnership interests held by Fab 36 Beteiligungs and
exercised the option on April 1, 2008 for approximately $95 million related to its limited partnership interest and
$38 million related to its silent partnership interest. As of December 27, 2008, the remaining unaffiliated limited
partner, Leipziger Messe, held partnership interests of approximately $197 million, of which $169 million was for
its limited partnership interests and $28 million was for its silent partnership interest.
In addition, commencing five years after the completion of its capital contribution, Leipziger Messe has the
right to sell its limited partnership interest to third parties (other than competitors), subject to a right of first
refusal held by AMD Fab 36 Holding and AMD Fab 36 Admin, or to put its limited partnership interest to AMD
Fab 36 Holding and AMD Fab 36 Admin. The put option is thereafter exercisable every three years. Leipziger
Messe also has a put option in the event they are outvoted at AMD Fab 36 KG partners’ meetings with respect to
certain specified matters such as increases in the partners’ capital contributions beyond those required by the
partnership agreements, investments significantly in excess of the business plan, or certain dispositions of the
limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put
option is Leipziger Messe’s capital account balance plus accumulated or accrued profits. The purchase price
under the call option is the same amount, plus a premium of $4.9 million. The right of first refusal price is the
lower of the put option price or the price offered by the third party that triggered the right. We guaranteed the
payments under the put options.
In addition, AMD Fab 36 Holding and AMD Fab 36 Admin are obligated to repurchase Leipziger Messe’s
silent partnership interests in annual 25 percent installments. During 2008, we repurchased $25 million of silent
partnership interests from Leipziger Messe. As of December 27, 2008, of the $113 million of Leipziger Messe’s
original silent partnership interests, AMD Fab 36 Holding and AMD Fab 36 Admin had repurchased an
aggregate of $85 million.
Under U.S. generally accepted accounting principles, we initially classified the portion of the silent
partnership contribution that is mandatorily redeemable as debt on the consolidated balance sheets at its fair
value at the time of issuance because of the mandatory redemption features described in the preceding paragraph.
Each accounting period, we increase the carrying value of this debt towards its ultimate redemption value of the
silent partnership contributions by the guaranteed annual rate of return of between 11 percent and 13 percent. We
record this periodic accretion to redemption value as interest expense.
Leipziger Messe’s limited partnership contributions and the New Silent Partnership Portion described above
are not mandatorily redeemable, but rather are subject to redemption outside of the control of AMD Fab 36
Holding and AMD Fab 36 Admin. In consolidation, we initially record these contributions as minority interest,
based on their fair value. Each accounting period, we increase the carrying value of this minority interest toward
its ultimate redemption value of these contributions by the guaranteed rate of return of between 11 percent and 13
percent. We classify this periodic accretion of redemption value as minority interest. No separate accounting is
required for the put and call options because they are not freestanding instruments and not considered derivatives
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
In addition to support from us and the consortium of banks referenced above, the Federal Republic of
Germany and the State of Saxony have agreed to support the Fab 36 project in the form of:
• a loan guarantee equal to 80 percent of the losses sustained by the lenders after foreclosure on all other
security; and
• subsidies consisting of grants and allowances totaling up to approximately $764 million, depending on
the level of capital investments by AMD Fab 36 KG and $32 million allowances depending on the level
of capital investments for expansion of production capacity at the Dresden site.
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