Capital One 2004 Annual Report Download - page 97

During 2003, the Company issued $600.0 million of five-year 4.875% fixed rate senior bank notes, $500.0
million of ten-year 6.5% fixed rate subordinate bank notes, $600.0 million of seven-year 5.75% fixed rate senior
bank notes, and $500.0 million of five-year 4.25% fixed rate senior bank notes under the Senior and
Subordinated Global Bank Note Program.
Mandatory Convertible Securities
In April 2002, the Company completed a public offering of mandatory convertible debt securities (the “Upper
Decs®”), that resulted in net proceeds of approximately $725.1 million. The net proceeds were used for general
corporate purposes. Each Upper Dec®initially consists of and represents (i) a senior note due May 17, 2007 with
a principal amount of $50, on which the Company will pay interest quarterly at the initial annual rate of 6.25%,
and (ii) a forward purchase contract pursuant to which the holder has agreed to purchase, for $50, shares of the
Company’s common stock on May 17, 2005 (or earlier under certain conditions), with such number of shares to
be determined based upon the average closing price per share of the Company’s common stock for 20
consecutive trading days ending on the third trading day immediately preceding the stock purchase date at a
minimum per share price of $63.91 and a maximum per share price of $78.61. The minimum and maximum
amount of shares to be issued by the Company is 9.5 million and 11.7 million shares, respectively.
The senior notes will initially be pledged to secure the holder’s obligations under the forward purchase contracts.
Each holder of an Upper Dec®may elect to withdraw the pledged senior notes or treasury securities underlying
the Upper Decs®by substituting, as pledged securities, specifically identified treasury securities that will pay $50
on the relevant stock purchase date, which is the amount due on that date under each forward purchase contract.
In February 2005, the Company completed the remarketing of the senior notes. See Footnote 24, Subsequent
events, for additional information related to this transaction.
Corporation Shelf Registration Statement
As of December 31, 2004, the Corporation has an effective shelf registration statement under which the
Corporation from time to time may offer and sell senior or subordinated debt securities, preferred stock, common
stock, common equity units and stock purchase contracts. The Corporation’s shelf registration statement had $1.9
billion available at December 31, 2004.
In November 2003, the Company issued $300.0 million ten-year 6.25% fixed rate senior notes through its shelf
registration.
Other Borrowings
Secured Borrowings
COAF, a subsidiary of the Company, maintained fourteen agreements to transfer pools of consumer loans
accounted for as secured borrowings at December 31, 2004. The agreements were entered into between 2001 and
2004, relating to the transfers of pools of consumer loans totaling $14.8 billion. Principal payments on the
borrowings are based on principal collections, net of losses, on the transferred consumer loans. The secured
borrowings accrue interest predominantly at fixed rates and mature between June 2006 and December 2009, or
earlier depending upon the repayment of the underlying consumer loans. At December 31, 2004 and 2003, $8.2
billion and $6.4 billion, respectively, of the secured borrowings were outstanding.
Facility Financing
During 2003, the Company consolidated certain variable interest entities related to structured operating leases for
several office facilities, bringing the premises and related facility financing on-balance sheet. During 2004, the
Company terminated the structured operating lease and extinguished the related facility financing. The Company
had $83.8 million in facility financing on the consolidated balance sheet at December 31, 2003, and had no debt
outstanding at December 31, 2004.
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