CONVERTIBLE SENIOR NOTES
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9 Months Ended |
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Sep. 30, 2013
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CONVERTIBLE SENIOR NOTES |
9. CONVERTIBLE
SENIOR NOTES
In 2010, the Company issued $600.0 million in aggregate principal
amount of its 4% convertible senior notes due 2015 (“4%
Convertible Senior Notes”) for net proceeds of approximately
$582.0 million. The Company has repurchased $492.5 million in
aggregate principal amount of its 4% Convertible Senior Notes as of
September 30, 2013. Interest on the 4% Convertible Senior Notes is
paid semi-annually at a rate of 4% per year and the 4% Convertible
Senior Notes will mature on February 15, 2015 unless repurchased or
converted earlier. The 4% Convertible Senior Notes are
convertible into shares of Common Stock at a conversion rate for
each $1,000 principal amount of 4% Convertible Senior
Notes. The initial conversion rate was 46.6070, which
was equivalent to an initial conversion price of approximately
$21.4560 per share of Common Stock. The conversion rate at
September 30, 2013 was 77.3716, which is equivalent to a conversion
price of approximately $12.9246 per share of Common
Stock. The conversion rate is subject to adjustment in
certain circumstances. There is no limit on the total
number of shares of Common Stock that the Company would be required
to issue upon a conversion.
The
intrinsic value of the contingent beneficial conversion feature was
$88.6 million and $75.8 million at September 30, 2013 and December
31, 2012, respectively, which is reflected in Additional paid-in
capital on the Company’s Consolidated Statements of Financial
Condition, and reduces the recorded liability on the 4% Convertible
Senior Notes. The unamortized contingent beneficial conversion
feature of the 4% Convertible Senior Notes at September 30, 2013
and December 31, 2012 of $26.7 million and $22.7 million,
respectively, is recognized in interest expense over the remaining
life of the notes.
In
May 2012, the Company issued $750.0 million in aggregate principal
amount of its 5% convertible senior notes due 2015 (“5%
Convertible Senior Notes”) for net proceeds of approximately
$727.5 million. Interest on the 5% Convertible Senior Notes is
paid semi-annually at a rate of 5% per year and the 5% Convertible
Senior Notes will mature on May 15, 2015 unless repurchased or
converted earlier. The 5% Convertible Senior Notes are
convertible into shares of Common Stock at a conversion rate for
each $1,000 principal amount of 5% Convertible Senior Notes.
The initial conversion rate and conversion rate at September 30,
2013 was 52.7969, which was equivalent to an initial conversion
price of approximately $18.94 per share of Common Stock, subject to
adjustment in certain circumstances. Upon conversion, the
Company will pay or deliver, as the case may be, cash, shares of
Common Stock or a combination of cash and shares of Common Stock,
at the Company’s sole discretion. There is no limit on the
total number of shares of Common Stock that the Company would be
required to issue upon a conversion.
At
issuance, the Company determined that the 5% Convertible Senior
Notes included an equity component of $11.7 million, which is
reflected in Additional paid-in capital on the Company’s
Consolidated Statements of Financial Condition, and reduces the
recorded liability on the 5% Convertible Senior
Notes. The $11.7 million discount to the principal
amount of the Convertible Senior Notes is recognized in interest
expense over the remaining life of the notes. At September 30, 2013
and December 31, 2012, $6.3 million and $9.3 million, respectively,
of the discount had not been reflected in interest
expense.
The
4% Convertible Senior Notes due 2015 and the 5% Convertible Senior
Notes due 2015 rank pari passu with each other. They are each a
general corporate obligation and therefore rank junior to
collateralized debt of the Company with respect to secured
collateral.
The
4% Convertible Senior Notes and the 5% Convertible Senior Notes
rank senior to the 7.875% Series A Cumulative Redeemable Preferred
Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and
7.50% Series D Cumulative Redeemable Preferred Stock. The
7.875% Series A Cumulative Redeemable Preferred Stock, 7.625%
Series C Cumulative Redeemable Preferred Stock and 7.50% Series D
Cumulative Redeemable Preferred Stock rank pari passu with each
other.
The
7.875% Series A Cumulative Redeemable Preferred Stock, 7.625%
Series C Cumulative Redeemable Preferred Stock and 7.50% Series D
Cumulative Redeemable Preferred Stock rank senior to the common
stock of the Company.
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