April 23, 2007 / 10:29 PM / 13 years ago

UPDATE 1-AMD offers up to $2.2 billion in notes

(Recasts, adds details, analyst comment, share price)

SAN FRANCISCO, April 23 (Reuters) - Advanced Micro Devices Inc. AMD.N said on Monday it will offer up to $2.2 billion in convertible notes, raising capital for the No. 2 computer chip maker at a time when it is losing money.

Last Thursday, AMD posted a $611 million quarterly loss, hurt by a price war with Intel Corp. (INTC.O), and said it would explore ways to raise new capital.

The move comes amid speculation the company could seek a deal with private equity firms, talk that was stoked last week when Chief Executive Hector Ruiz said he was “completely open” to that possibility.

AMD shares fell 2.8 percent after the announcement. The stock has plunged 56 percent over the past year, compared with a rise of 15 percent for Intel.

“I’m not sure it gets them completely out of the woods and it also shows or questions how much private equity is getting involved,” said American Technology Research’s Doug Freedman.

Earlier on Monday, credit ratings agency Standard & Poor’s downgraded AMD to “B”, it’s fifth-highest “junk” grade, citing “subpar” execution of its business and a tougher business environment.

AMD said at least $500 million of the net proceeds would be used to pay back part of the $2.5 billion loan it took out to buy graphics chip maker ATI last year.

Analysts have said the acquisition has limited the company’s ability to raise new cash since it is required to use a portion of new funds to repay the loan early.

AMD would offer an initial amount of $1.8 billion in notes, with the interest rate, conversion price and other terms to be determined in negotiations. Initial purchasers will also have the option of buying an additional $400 million of notes.

AMD said it would enter into capped call transactions in connection with the offering, a move intended to reduce the potential dilution to common stockholders if the notes are converted into shares.

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