UPDATE 2-AMD to redeem up to $1.4 bln of notes, shares rise

Wed Nov 18, 2009 2:11pm EST

* AMD to buy back up to $1 bln of convertible notes

* To redeem $390 mln senior notes

* Plans private $500 mln offering of senior notes

* Shares up almost 9 percent (Adds analyst comment, debt details, background)

By Ian Sherr

SAN FRANCISCO, Nov 18 (Reuters) - Advanced Micro Devices Inc (AMD.N), riding on a $1.25 billion payment from Intel Corp (INTC.O) to settle their disputes, plans to buy back up to $1.4 billion of debt to improve its risk profile.

Shares of AMD rose 8.91 percent on the news, which came about a week after the chip maker announced a settlement with larger rival Intel on all their outstanding legal battles. [ID:nN12421488]

AMD said on Wednesday it started a tender offer for up to $1 billion of 5.75 percent convertible senior notes due 2012. It also said it would redeem 7.75 percent senior notes due Dec. 18, 2009, or about $390 million of debt.

"Any time you have as much debt as AMD has on their balance sheet, you just worry that if economic conditions weaken, and sales fall, and various bad things happen that you could end up with a financially stressed company," said FTN Equity Capital Markets analyst Joanne Feeney.

By paying off the debt, AMD is reducing that risk and can attract more conservative investors, she said.

To finance the $1 billion convertibles buyback, AMD said it would issue $500 million of senior notes due 2017 in a private offering, and use the Intel payment. Moody's Investors Service gave the notes a rating of B2, or a speculative "not prime" rating.

Although AMD's chip-design arm eked out a profit in its fiscal third quarter, the company has been steadily bleeding market share to Intel, whose microprocessors reside in 80 percent of the world's computers.

AMD reported in its fiscal third quarter that it has just under $3.2 billion of net debt.

During the AMD's analyst conference in early November, Chief Financial Officer Thomas Seifert said he planned to keep about $1 billion cash on hand for the foreseeable future, using the rest for debt reduction.

Its shares rose 59 cents to $7.21 on the New York Stock Exchange. (Reporting by Ian Sherr; Editing by Steve Orlofsky)