Debt



As of	2011			2010
2014 convertible senior notes, due 2014 at stated rate of 1.875%	$	815		$	1,058
Capital lease obligations, due 2023 at 6.1% and 7.2%, respectively	423			527
2031A convertible senior notes, due 2031 at stated rate of 1.5%	255			—
2031B convertible senior notes, due 2031 at stated rate of 1.875%	234			—
2013 convertible senior notes, due 2013 at stated rate of 4.25%	139			230
2027 convertible senior notes, due 2027 at stated rate of 1.875%	135			—
TECH credit facility at effective interest rate of 3.9%	—			348
Mai-Liao Power note at effective interest rate of 12.1%	—			196
Other notes	—			1
	2,001			2,360
Less current portion	(140		)	(712		)
	$	1,861		$	1,648

Convertible Notes With Debt And Equity Components

The accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion require the debt and equity components to be stated separately. The amount recorded as debt is based on the fair value of the debt component as a standalone instrument, determined using an average interest rate for similar nonconvertible debt issued by entities with credit ratings comparable to ours at the time of issuance. The difference between the debt recorded at inception and its principal amount is to be accreted to principal through interest expense through the estimated life of the note. Accordingly, the debt and equity components are required to be stated separately for the following notes:


•	1.875% Convertible Senior Notes due 2014 (the "2014 Notes")


•	1.5% Convertible Senior Notes due 2031 (the "2031A Notes")


•	1.875% Convertible Senior Notes due 2031 (the "2031B Notes" and together with the 2031A Notes, the "2031 Notes")


•	1.875% Convertible Senior Notes due 2027 (the "2027 Notes")

The debt and equity components of our 4.25% Convertible Senior Notes due 2013 (the "2013 Notes") are not required to be stated separately as they must be settled in shares of our common stock upon conversion. Information related to our convertible notes with debt and equity components is as follows:



As of 2011	2014 Notes			2031A Notes			2031B Notes			2027 Notes
Outstanding principal	$	949		$	345		$	345		$	175
Unamortized discount	(134		)	(90		)	(111		)	(40		)
Net carrying amount of debt	815			255			234			135
Carrying amount of equity component	368			89			109			40
Remaining discount amortization period (in years)	2.8			6.9			8.9			5.8

As of September 2, 2010, the 2014 Notes had $1,300 million of outstanding principal and $1,058 million of net carrying value (net of unamortized discount of $242 million).

Information related to interest rates and expense of our convertible notes with debt and equity components is as follows:



For the year ended 2011	2014 Notes			2031A Notes			2031B Notes			2027 Notes
Effective interest rate	7.9		%	6.5		%	7.0		%	6.9		%
Interest cost related to contractual interest rate	$	19		$	1		$	1		$	3
Interest costs related to amortization of discount and issuance costs	46			1			1			5

Interest expense for 2010 included $24 million for the contractual interest rate and $56 million from the amortization of discount and issuance costs from the 2014 Notes and interest expense for 2009 included $25 million for the contractual interest rate and $52 million from the amortization of discount and issuance costs from the 2014 Notes.

Debt Restructure

On November 3, 2010, we completed the following series of debt restructure transactions in connection with separate privately negotiated agreements entered into on October 28, 2010 with certain holders of our convertible notes:


•	Exchanged $175 million in aggregate principal amount of our 2014 Notes for $175 million in aggregate principal amount of the 2027 Notes (the "Exchange Transaction").


•	Repurchased $176 million in aggregate principal amount of our 2014 Notes for $171 million in cash (the "Partial Repurchase of 2014 Notes").


•	Repurchased $91 million in aggregate principal amount of our 2013 Notes for $166 million in cash (the "Partial Repurchase of 2013 Notes").

Exchange Transaction: In the Exchange Transaction, $175 million in aggregate principal amount of our 2014 Notes was extinguished. The extinguishment resulted in the derecognition of $144 million in debt for the principal of the 2014 Notes (net of $31 million of debt discount) and $13 million of additional capital. We recognized a loss of $15 million on the exchange based on the estimated $157 million fair value of the debt component of the 2014 Notes exchanged and their $142 million carrying value (net of unamortized issuance costs).

Partial Repurchase of the 2014 Notes: Because the liability and equity components of the 2014 Notes were stated separately, the repurchase of $176 million aggregate principal amount resulted in the derecognition of $144 million in debt (net of $32 million of debt discount) and $13 million of additional capital. We recognized a loss of $17 million (including transaction fees) on the repurchase based on the estimated $158 million fair value of the debt components of the 2014 Notes repurchased. The fair value of the debt component of the 2014 Notes was estimated using an interest rate for nonconvertible debt, with terms similar to the debt component of the 2014 Notes on a standalone basis, issued by entities with credit ratings comparable to ours at the exchange date (Level 2).

Partial Repurchase of the 2013 Notes: We recognized a loss of $79 million (including transaction fees) in the repurchase of the 2013 Notes.

2014 Notes

In May 2007, we issued $1.3 billion of the 2014 Notes, of which $351 million was extinguished on November 3, 2010 in connection with the Exchange Transaction and Partial Repurchase of the 2014 Notes. The initial conversion rate of the 2014 Notes is 70.2679 shares of common stock per $1,000 principal amount, or approximately $14.23 per share.

Conversion Rights: Holders may convert their 2014 Notes under the following circumstances: (1) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 130% of the conversion price of the 2014 Notes (approximately $18.50 per share); (2) if the 2014 Notes have been called for redemption; (3) if specified distributions or corporate events occur, as set forth in the indenture for the 2014 Notes; (4) if the trading price of the 2014 Notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the 2014 Notes during the periods specified in the indenture; or (5) at any time on or after March 1, 2014.

Upon conversion, we will have the right to deliver shares of our common stock, cash or a combination of cash and shares of common stock.

Cash Redemption at Our Option: We may redeem for cash the 2014 Notes if the last reported sale price of our common stock has been at least 130% of the conversion price (approximately $18.50 per share) for at least 20 trading days during any 30 consecutive trading-day period. The redemption price is 100% of the principal amount to be redeemed, plus accrued and unpaid interest.

Cash Repurchase at the Option of the Holder: Upon a change in control or a termination of trading, as defined in the indenture, holders may require us to repurchase for cash all or a portion of their 2014 Notes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest, if any.

Capital Lease Obligations

We have various capital lease obligations due in periodic installments through February 2023 at weighted-average effective interest rates of 6.1% as of 2011 and 7.2% as of 2010.

In 2011, we received $268 million in proceeds from sales-leaseback transactions and as a result recorded capital lease obligations aggregating $246 million at a weighted-average effective interest rate of 5.4%, payable in periodic installments through May 2016.

In 2010, we recorded $121 million in capital lease obligations with a weighted-average effective interest rate of 9.5%, payable in periodic installments through December 2020.

2031A and 2031B Notes

On July 26, 2011, we issued $345 million of the 2031A Notes and $345 million of 2031B Notes, each due August 1, 2031. Issuance costs for the 2031 Notes totaled $18 million. The initial conversion rate for the 2031 Notes is 105.2632 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $9.50 per share of common stock. Interest is payable in February and August of each year.

Upon the issuance of the 2031 Notes, we recorded $487 million of debt, $198 million of additional capital and $13 million of deferred debt issuance costs (included in other noncurrent assets). The amount recorded as debt is based on the fair value of the debt component as a standalone instrument, and was determined using an average interest rate for similar nonconvertible debt issued by entities with credit ratings comparable to ours at the time of issuance (Level 2). The difference between the debt recorded at inception and the principal amount ($91 million for the 2031A Notes and $112 million for the 2031B Notes) is being accreted to principal through interest expense through August 2018 for the 2013A Notes and August 2020 for the 2031B Notes, the expected life of the notes.

Conversion Rights: Holders may convert their 2031 Notes under the following circumstances: (1) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price of the 2031 Notes (approximately $12.35 per share); (2) if the 2031 Notes are called for redemption; (3) if specified distributions or corporate events occur, as set forth in the indenture for the 2031 Notes; (4) if the trading price of the 2031 Notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the 2031 Notes during the periods specified in the indenture; or (5) at any time after May 1, 2031.

Upon conversion, we will pay cash up to the aggregate principal amount and cash, shares of common stock or a combination of cash and shares of common stock, at our option, for any remaining conversion obligations. As a result of the settlement terms upon conversion of the 2031 Notes, the 2031 Notes are considered in diluted earnings per share under the treasury stock method.

Cash Redemption at Our Option: We may redeem for cash the 2031A Notes on or after August 5, 2013 and the 2031B Notes on or after August 5, 2014 if the last reported sale price of our common stock has been at least 130% of the conversion price (approximately $12.35 per share) for at least 20 trading days during any 30 consecutive trading day period. The redemption price will equal the principal amount plus accrued and unpaid interest. If we redeem the 2031A Notes prior to August 5, 2015, or the 2031B Notes prior to August 5, 2016, we will also make a "make-whole premium" payment in cash equal to the present value of all remaining scheduled payments of interest on the 2031 Notes, using a discount rate equal to 150 basis points.

Cash Repurchase at the Option of the Holder: We may be required by the holders of the 2031 Notes to repurchase for cash all or a portion of the 2031A Notes on August 1, 2018 and all or a portion of the 2031B Notes on August 1, 2020. The repurchase price is equal to the principal amount, plus accrued and unpaid interest. Upon a change in control or a termination of trading, as defined in the indenture, we may be required by the holders of the 2031 Notes to repurchase for cash all or a portion of their 2031 Notes at a repurchase price equal to the principal amount plus accrued and unpaid interest.

2013 Notes

In April 2009, we issued $230 million of the 2013 Notes and in connection with Partial Repurchase of 2013 Notes, repurchased $91 million of aggregate principal balance on November 3, 2010. The initial conversion rate is 196.7052 shares of common stock per $1,000 principal amount or approximately $5.08 per share, and is subject to adjustment upon the occurrence of certain events specified in the indenture.

Conversion Rights: The 2013 Notes may by converted by their holders at any time prior to October 15, 2013.

Cash Redemption at Our Option: We may redeem for cash the 2013 Notes on or after April 20, 2012 if the closing price of our common stock has been at least 135% of the conversion price (approximately $6.86 per share) for at least 20 trading days during a 30 consecutive trading-day period. The redemption price will equal the principal amount and accrued and unpaid interest plus a make-whole premium equal to the present value of the remaining interest payments from the redemption date to the date of maturity.

Cash Repurchase at the Option of the Holder: Upon a change in control or a termination of trading, as defined in the indenture, we may be required to repurchase for cash all or a portion of the 2013 Notes at a repurchase price equal to 100% of the principal plus any accrued and unpaid interest to, but excluding, the repurchase date.

2027 Notes

In connection with the Exchange Transaction on November 3, 2010, we issued $175 million of 2027 Notes. The initial conversion rate is 91.7431 shares of common stock per $1,000 principal amount or approximately $10.90 per share, and is subject to adjustment upon the occurrence of certain events specified in the indenture.

Upon the issuance of the 2027 Notes, we recorded $130 million of debt, $40 million of additional capital and $2 million of deferred debt issuance costs (included in other noncurrent assets). The amount recorded as debt is based on the fair value of the debt component as a standalone instrument, and was determined using an average interest rate for similar nonconvertible debt issued by entities with credit ratings comparable to ours at the time of issuance (Level 2). The $45 million difference between the debt recorded at inception and its principal amount will be accreted to principal through interest expense to June 2017, the expected life of the 2027 Notes. The fair value of the 2027 Notes was based on the trading price on the exchange date (Level 1).

Conversion Rights: Holders may convert their 2027 Notes under the following circumstances: (1) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 130% of the conversion price (approximately $14.17 per share); (2) if the 2027 Notes have been called for redemption; (3) if specified distributions or corporate events occur; (4) if the trading price of the 2027 Notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the 2027 Notes during the period specified in the indenture; (5) upon our election to terminate the conversion right of the 2027 Notes; or (6) after March 1, 2027.

Upon conversion, we will pay cash up to the aggregate principal amount and shares of common stock or cash, at our option, for any remaining conversion obligation. As a result of the conversion provisions in the indenture, upon conversion of the 2027 Notes only the amounts payable in excess of the principal amounts of the 2027 Notes are considered in diluted earnings per share under the treasury stock method.

Cash Redemption at Our Option: We may redeem for cash the 2027 Notes on or after June 1, 2014 at a price equal to the principal amount plus accrued and unpaid interest.

Cash Repurchase at the Option of the Holder: We may be required by the holders of the 2027 Notes to repurchase for cash the 2027 Notes on June 1, 2017. The repurchase price is equal to the principal amount, plus accrued and unpaid interest. Upon a change in control or a termination of trading, as defined in the indenture, we may be required by the holders of the 2027 Notes to repurchase for cash all or a portion of their 2027 Notes at a repurchase price equal to the principal amount plus accrued and unpaid interest.

Termination of Conversion Rights: We may elect to terminate the conversion right of the 2027 Notes if the daily volume weighted average price of our common stock is greater than or equal to 130% of the conversion price (approximately $14.17 per share) for at least 20 trading days during any 30 consecutive trading day period. If we terminate the conversion right prior to June 1, 2014 and any 2027 Notes are converted in connection with the termination, we will pay a make-whole premium equal to the accrued interest as of the conversion date plus the present value of remaining interest that would have been paid through May 31, 2014, discounted using a U.S. Treasury bond with an equivalent term. Subject to the terms of the indenture, we may, at our election, deliver shares of common stock in lieu of cash with respect to this make-whole payment.

TECH Credit Facility

In the third quarter of 2011, we repaid the remaining $250 million outstanding principal balance of the TECH credit facility, plus accrued interest, that was due in periodic payments through May 2012. In connection therewith, $60 million of cash that was previously restricted was released to us. (See "TECH Semiconductor Singapore Pte. Ltd." note.)

Maturities of Notes Payable and Future Minimum Lease Payments

As of September 1, 2011, maturities of notes payable and future minimum lease payments under capital lease obligations were as follows:



	Notes Payable			Capital Lease Obligations
2012	$	—		$	151
2013	—			80
2014	1,088			78
2015	—			73
2016	—			45
2017 and thereafter	865			71
Discounts and interest, respectively	(375		)	(75		)
	$	1,578		$	423

Debt Guarantee

Concurrent with the Numonyx acquisition, we entered into agreements with STMicroelectronics N.V. and DBS Bank Ltd. ("DBS") that required us to guarantee a then outstanding loan, made by DBS to Hynix-Numonyx Semiconductor Ltd. (the "Hynix JV"). The outstanding balance of the Hynix JV loan was $250 million as of the acquisition date and was due in periodic installments from calendar 2014 through 2016. Under the agreements, we deposited $250 million, accounted for as restricted cash, into a pledged account at DBS to collateralize the guarantee of the loan. In the third quarter of 2011, the Hynix JV repaid the $250 million outstanding principal balance of the loan before the scheduled due dates, and accordingly, our obligation to guarantee the debt ceased and the $250 million restricted cash collateral was released to us. We recognized a gain of $15 million in the third quarter of 2011 in other non-operating income (expense) for the termination of our debt guarantee obligation.