From an old post of mine (I think AMD's bonds qualify for junk status):
Junk Bond Bonds that have little or no collateral or liquidation value and are typically very risky. For this risk, they offer a high rate of return. They are issued by corporations without sales and earnings track records, or by those with questionable credit. Moreover, in the 1980s, junk bonds were popular instruments for corporate mergers and acquisitions. The bonds usually have a credit rating of BB or lower. Because the term has an unfavorable connotation, issuers and holders prefer the bonds to be called "high yield bonds."
B
Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
I see that Greg answered your question. I wonder how much shareholder dilution those convertables could represent?
Also interesting from the article: "The company said it has registered with the U.S. Securities and Exchange Commission to sell up to $2 billion of securities."
S&P cuts Advanced Micro Devices corp credit rating Tuesday November 19, 11:28 am ET
(The following statement was released by the rating agency) NEW YORK, Nov 19 - Standard & Poor's Ratings Services said today that it lowered its corporate credit rating on Advanced Micro Devices Inc. (AMD) to 'B-' from 'B'. Other ratings were also lowered. At the same time, Standard & Poor's assigned a 'CCC' rating to the company's $300 million proposed convertible senior subordinated note issue, which is structurally subordinated to the debt of its Germany-based operations. The actions reflected expectations that market conditions will remain challenging, pressuring the company's ability to achieve its stated goals of significant profitability in 2003.
The outlook is negative.
The Sunnyvale, Calif.-based personal computer microprocessor company had $1.85 billion of debt outstanding at Sept. 30, 2002, pro forma for a proposed new $300 million five-year convertible senior note issue.
The company has a distant second place, about an 18% share, in the microprocessor market by units sold, principally in the desktop segment.
Although market conditions are likely to remain depressed, Standard & Poor's does not expect the microprocessor operation's near-term financial performance to be burdened by an outdated product mix. AMD's recent actions should contribute to profitability, and the company hopes to restore EBITDA to approximately break-even levels in the December quarter, with material improvements thereafter.
"Although AMD is refreshing its product portfolio and cutting costs, competitive pressures and weak market conditions are expected to be very challenging," said Standard & Poor's credit analyst Bruce Hyman. "If the company cannot significantly improve its operating profitability and cash flows, or if financial flexibility declines materially, ratings could be lowered." Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www2.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.
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