Fitch rates Advanced Micro Devices loan BB-, ups note to BB-

Fitch Ratings said it assigned a BB- rating with a recovery rating of RR2 to Advanced Micro Devices Inc.'s $2.5 billion senior secured term loan B due 2013, affirmed the company's B issuer default rating and upgraded its $390 million 7¾% senior notes due 2012 to BB-/RR2 from B/RR4 due to a provision in the notes' indenture that requires the notes be equally secured with the term loan.

The outlook was revised to positive from negative.

The term loan B is expected to close during the week of Oct. 23 in conjunction with the consummation of Advanced Micro's acquisition of ATI Technologies.

The ratings and outlook reflect Fitch's belief that Advanced Micro's operating performance will be stronger and less volatile than it was historically despite a challenging operating environment, that the company's strong product technology roadmap will allow it to at least sustain a roughly 20% share of the microprocessor market and that the acquisition of ATI Technologies will provide Advanced Micro with the capabilities necessary to offer platform products in the intermediate term, as well as additional revenue growth opportunities resulting from ATI's relatively small but rapidly growing exposure to consumer markets.

Ratings concerns center on Intel Corp.'s refreshed product line-up, which is anticipated to stem or even modestly reverse market share lost to Advanced Micro over the past few years; significant capacity additions by both Intel and Advanced Micro in the near term, likely resulting in excess capacity and pressuring average selling prices and gross margins; Advanced Micro's limited financial flexibility due to significant spending requirements on capital equipment, research and development investments and marketing initiatives; and less robust personal computer demand growth anticipated for 2007-2009.

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