Creditor, Shareholders Take Critical Look At AMD

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March 11, 1999 (1:20 PM EST)

Creditor, Shareholders Take Critical Look At AMD

By Mark Hachman,

Advanced Micro Devices' manufacturing difficulties and volatile stock price have prompted a possible downgrade of its credit rating and two class-action lawsuits.

Moody's Investors Service has placed AMD under review, evaluating its credit and secured debt in light of AMD's recent announcement that manufacturing difficulties would contribute to a significant shortfall for the current quarter. Moody's is reviewing all AMD's senior debt offerings, including its $400 million Senior secured public debt, $517 million unsecured public debt, $250 million bank loan, and secured and unsecured shelf registrations.

That debt will be used to fund AMD's ongoing capital-equipment investment, which will total about $900 million this year, according to Moody's.

AMD's cycle of optimistic production forecasts, followed by disclosures that it would fail to meet those estimates, also led a Southern California law firm to file suit against AMD. The suit claims AMD either deliberately or carelessly touted its manufacturing capabilities, causing Wall Street analysts to raise their estimates of the company's stock, which plunged when manufacturing problems were later disclosed.

The lawsuits filed on behalf of shareholders are totally without merit, said Thomas M. McCoy, senior vice president and general counsel of AMD, in a statement. "The company will vigorously contest the suit[s]."