Lehman bankruptcy bad news for AMD shareholders

Posted on Sunday, December 21 2008 @ 13:19 CET by Thomas De Maesschalck
AMD warned investors on Friday that the bankruptcy of Lehman Brothers means AMD shareholders are no longer protected from dilution when buyers of $2.2 billion of AMD's debt eventually try to cash in their convertible shares:
AMD's debt offering, from April 2007, was a survival move. The company had to raise money to stay afloat as it bled cash from its acquisition of graphics-chip maker ATI Technologies and a bruising price battle with Intel Corp.

AMD said in a regulatory filing Friday that because of Lehman Brothers' bankruptcy, the bank defaulted on the so-called "capped call" transaction and that AMD could no longer count on it to prevent dilution.

The deal was supposed to work like this: AMD paid Lehman Brothers $182 million to scoop up enough AMD shares before 2015, when the convertible senior notes come due, so that it could hand those shares back to AMD and cancel out the new shares that would flood the market when the senior notes were converted into shares of stock.


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Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.



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