Highly Levered Chip Stocks Sell Off on Refinance Worries

Includes: AMD, IFNNY, MU, QI, SPSN
by: Eric Savitz

Monday was a rough day for highly leveraged semiconductor stocks.

In a research note Monday morning, Citigroup’s Glen Yeung provided a review of the credit liabilities of the chip companies Citi has under coverage. He notes that Advance Micro Devices (NYSE:AMD), Spansion (SPSN), Infineon (IFX) and Qimonda (QI) all have debt coming due in the next 15 months. “In each instance, we point out that an already difficult financial position is compromised by the current credit market,” Yeung noted.

He also noted that AMD, MU and QI also rank among the chip companies with the worst interest coverage ratio. “Despite historically low valuations, we advise investors to steer clear of these names in light of the current market conditions,” he writes

Meanwhile, American Technology Research analyst Doug Freedman asserted in a note Monday morning that he now believes an acquisition of Qimonda by rival Micron “is likely to happen.” He thinks a deal could be done at about a quarter of Qimonda’s book value, which would mean about $1 a share.

In Monday’s trading at 3:50pm EDT:

  • AMD was down 44 cents, or 8.1%, to $4.98.
  • Qimonda was down 22 cents, or 9,1%, to $2.20.
  • Micron was down 44 cents, or 9.1%, to $4.40.
  • Spansion was down 23 cents, or 10.3%, to $2.01.
  • Infineon was down 46 cents, or 5.7%, to $7.60.