Long-Term Debt

1.00 % Convertible Senior Notes Due 2018

On December 2, 2013, we issued $1.50 billion in Notes. The Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually at a rate of 1.00% per annum. The Notes will mature on December 1, 2018 unless earlier repurchased or converted in accordance with their terms prior to such date. Under the terms of the Notes, they may be converted based on an initial conversion rate of 49.60 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of $20.16 per share of common stock), subject to adjustment as described in the indenture governing the Notes.

As of July 26, 2015, none of the conditions allowing holders of the Notes to convert had been met. The determination of whether or not the Notes are convertible must be performed quarterly. If the Notes become convertible at the option of the holder, the carrying value of the Notes would be classified as a current liability and the difference between the principal amount and the carrying value of the Notes would be reflected as convertible debt in the mezzanine equity section on our Condensed Consolidated Balance Sheets.

The initial debt component of the Notes was valued at $1.35 billion based on the contractual cash flows discounted at an appropriate market rate for a non-convertible debt at the date of issuance, which was determined to be 3.15%. The carrying value of the permanent equity component reported in additional paid-in-capital was valued at $126 million and recorded as a debt discount. This amount, together with the $23 million purchaser's discount to the par value of the Notes represents the total unamortized debt discount of $149 million we recorded at the time of issuance of the Notes. The aggregate debt discount is amortized as interest expense over the contractual term of the Notes using the effective interest method using an interest rate of 3.15%.

The following table presents the carrying amounts of the liability and equity components:



	July 26,			January 25,
	2015			2015
	(In millions)
Amount of the equity component	$	126		$	126

1.00% Convertible Senior Notes Due 2018	$	1,500		$	1,500
Unamortized debt discount (1)	(101		)	(116		)
Net carrying amount	$	1,399		$	1,384

(1) As of July 26, 2015, the unamortized debt discount will be amortized over a remaining period of 3.4 years.

The following table presents interest expense for the contractual interest and the accretion of debt discount and issuance costs:



	Three Months Ended				Six Months Ended
	July 26,		July 27,		July 26,		July 27,
	2015		2014		2015		2014
	(In millions)
Contractual coupon interest expense	$	4	$	4	$	8	$	8
Amortization of debt discount and issuance costs	7		7		14		14
Total interest expense related to Notes	$	11	$	11	$	22	$	22