AMD's stock price slumped 2.86 percent in yesterday's after-hours trading as the company announced it would dilute shareholders by issuing $600 million worth of common stock and $450 million worth of convertible senior notes due 2026.
Net proceeds of the deals are expected to come in at $1.02 billion and AMD indicated it would primarily use the money to repay borrowings and to purchase outstanding senior notes.
After slumping for several years, AMD's stock price appreciated significantly since the start of 2016 as investors are speculating that the long-awaited turnaround may finally be around the corner. With these deals, AMD is using the momentum of its stock price to lower its debt burden and to push debt commitments further into the future.
AMD (NASDAQ: AMD) today announced that it intends to commence concurrent public offerings, subject to market and other conditions, of approximately $600 million of its common stock (the "Shares") and $450 million aggregate principal amount of its convertible senior notes due 2026 (the "New Notes"). AMD is offering all of the Shares and the New Notes. In addition, AMD expects to grant the underwriters a 30-day option to purchase up to approximately $90 million of additional shares of common stock at the public offering price and up to $67.5 million principal amount of additional convertible senior notes.
AMD intends to use net proceeds of $1,020 million received from the offerings to repay its borrowings under its credit facility and/or to purchase its outstanding senior notes. After the completion of a tender offer for its outstanding senior notes, AMD has the option, but not the obligation, to call any and all of the untendered 7.75 percent Senior Notes due 2020 with any remaining net proceeds. AMD will use any remaining net proceeds for capital expenditures, working capital and other general corporate purposes.