Shares of Advanced Micro Devices (AMD) are down $11 cents, or almost 3%, at $3.98 after the company this morning announced it will make a private placement of $300 million worth of senior notes due 2022, to be used for general corporate purposes and working capital.
Some of the money may go to paying down $485 million in notes paying 5.75% interest that are due this month, and another $580 million in 6% notes due in 2015.
Longbow Research’s Joanne Feeney, who has a Buy rating on shares of AMD, and an $8 price target, writes today that “AMD is following a cautious path by preserving its cash in this time of macro uncertainty,” using refinancing rather than paying off debt with cash on hand. She notes that the company’s working capital needs have risen with the global macroeconomic slowdown: the company had an accounts receivable balance of $744 million and inventories of $833 million at the end of last quarter, against accounts payable of $471 million and $661 million owed to manufacturing partner Global Foundries.
Feeney writes “We think cash preservation is a prudent move.”
Feeney expects the deal to price tonight.
Williams Financial Group’s Cody Acree, who also has a Buy on the stock, thinks AMD should be able to get favorable terms, writing, “While AMD’s balance sheet is not as strong as Texas Instruments, in our opinion, we do expect AMD should be able to refinance a portion of its debt at much more attractive interest rates.”
Update: AMD has priced the deal, announcing it will offer $500 million of 7.5% senior notes due 2022. The company expects net proceeds from the offering of $491 million.
AMD shares are unchanged at $4.01 in late trading.
Source : http://blogs.barrons.com/techtraderdaily/2012/08/06/amd-debt-refi-prudent-say-longbow-williams/
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