Capital One 2005 Annual Report Download - page 90

During 2004, the Company issued $500.0 million of ten-year 5.125% fixed rate senior bank notes and $500.0 million of five-
year 5.00% fixed rate senior bank notes under the Senior and Subordinated Global Bank Note Program.
In 2004, the Company repurchased senior bank notes in the amount of $124.5 million, which resulted in a pre-tax loss of $4.3
illion. m
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 consisted of and represented (i) a senior note due May 17, 2007 with a principal amount of $50, on
which the Company paid interest quarterly at the initial annual rate of 6.25%, and (ii) a forward purchase contract pursuant to
which the holder 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 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 issued by the Company was to be 9.5 million and 11.7 million shares, respectively.
The senior notes initially were pledged to secure the holder’ s obligations under the forward purchase contracts. Each holder
of an Upper Dec® was given the election to withdraw the pledged senior notes or treasury securities underlying the Upper
Decs® by substituting, as pledged securities, specifically identified treasury securities that paid $50 on the relevant stock
urchase date, which is the amount due on that date under each forward purchase contract. p
In February of 2005, pursuant to the original terms of the Upper Decs mandatory convertible securities issued in April of
2002, the Company completed a remarketing of approximately $704.5 million aggregate principal amount of its 6.25% senior
notes due May 17, 2007. As a result of the remarketing, the annual interest rate on the senior notes was reset to 4.738%.
Following the remarketing, the Company extinguished $585.0 million of the remarketed senior notes using the proceeds from
the issuance of $300.0 million of seven year 4.80% fixed rate senior notes and $300.0 million of twelve year 5.25% fixed rate
senior notes. The Company recognized a $12.4 million loss on the extinguishment of the remarketed senior notes.
In May 2005, the Company issued 10.4 million shares of common stock resulting in proceeds of $747.5 million in
accordance with the settlement provisions of the Upper DECs. The number of shares was based on the average closing price
f $71.77 for the Company’ s stock calculated over the twenty trading days prior to the settlement. o
C
orporation Shelf Registration Statement
As of December 31, 2005, 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
nd stock purchase contracts. The Corporation’ s shelf registration statement had $2.5 billion available at December 31, 2005. a
uring 2005, the Company issued $500.0 million of ten year 5.50% fixed rate senior notes. D
In November 2005, as part of the Hibernia acquisition, the Company assumed $100.0 million in ten year 5.35% fixed rate
bordinated notes. su
O
ther Borrowings
S
ecured Borrowings
COAF, a subsidiary of the Company, maintained nineteen agreements to transfer pools of consumer loans accounted for as
secured borrowings at December 31, 2005. The agreements were entered into between 2002 and 2005, relating to the
transfers of pools of consumer loans totaling $21.2 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 April 2007 and December 2010, or earlier depending upon the repayment of the underlying
consumer loans. At December 31, 2005 and 2004, $11.9 billion and $8.2 billion, respectively, of the secured borrowings
were outstanding.
Junior Subordinated Capital Income Securities and Junior Subordinated Debentures
In January 1997, Capital One Capital I, a subsidiary of the Bank created as a Delaware statutory business trust, issued $100.0
million aggregate amount of Floating Rate Junior Subordinated Capital Income Securities that mature on February 1, 2027.
The securities represent a preferred beneficial interest in the assets of the trust.
81