Capital One 2012 Annual Report Download - page 66

Recent Developments
Redemption of Trust Preferred Securities
As of December 31, 2012, we had outstanding trust preferred securities with a combined aggregate principal
amount of $3.65 billion that previously qualified as Tier 1 capital. On January 2, 2013, we redeemed all of our
outstanding trust preferred securities, which generally carried a higher coupon cost, ranging from 3.36% to
10.25%, than other funding sources available to us. Pursuant to the Dodd-Frank Act, the Tier 1 capital treatment
of trust preferred securities is to be phased out over a three year period starting on January 1, 2013.
Subordinated Note Exchange
On January 23, 2013, we announced the commencement of an “any and all” exchange offer for COBNA’s
$1.5 billion of outstanding 8.80% subordinated notes due 2019. The transaction involved offering current holders
market value plus an exchange premium for these outstanding notes, which was consideration paid through a
combination of new 10-year subordinated bank notes and cash. The exchange offer expired on February 20,
2013. Pursuant to the exchange offer, COBNA exchanged approximately 80% of its outstanding 8.80%
subordinated notes due 2019 for new 3.375% subordinated notes due 2023.
Credit Card Securitization
On February 1, 2013, we executed our first credit card securitization transaction since 2009 by issuing
$750 million of 3-year, AAA-rated fixed-rate notes from our credit card securitization trust.
Sale of Best Buy Card Portfolio
On February 19, 2013, we announced an agreement to sell the portfolio of Best Buy Stores, L.P. (“Best Buy”)
private label and co-branded credit card accounts that we acquired in the 2012 U.S. card acquisition to Citibank,
N.A. (“Citi”). At the time of the announcement, the portfolio had loan balances of approximately $7 billion. In
addition, we and Best Buy have agreed to end our contractual credit card relationship early. The sale of the loans
to Citi, which is subject to customary closing conditions, and early termination of the Best Buy partnership are
expected to be finalized in the third quarter of 2013. In the first quarter of 2013, the assets subject to the sale
agreement were transferred to the held for sale category. Upon closing, we expect that the proceeds from the sale
will approximate the book value of the accounts, resulting in no significant gain or loss on the transaction. For
additional information, see “Note 24—Subsequent Events.”
Business Outlook
We discuss below our current expectations regarding our total company performance and the performance of
each of our business segments over the near-term based on market conditions, the regulatory environment and
our business strategies as of the time we filed this Annual Report on Form 10-K. The statements contained in this
section are based on our current expectations regarding our outlook for our financial results and business
strategies. Our expectations take into account, and should be read in conjunction with, our expectations regarding
economic trends and analysis of our business as discussed in “Item 1. Business” and “Item 7. MD&A” of this
Report. Certain statements are forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Actual results could differ materially from those in our forward-looking statements.
Forward-looking statements do not reflect: (i) any change in current dividend or repurchase strategies, (ii) the
effect of any acquisitions, divestitures or similar transactions, except for the forward-looking statements
specifically discussing the ING Direct and 2012 U.S. card acquisitions, or (iii) any changes in laws, regulations
or regulatory interpretations, in each case after the date as of which such statements are made. See “Item 1.
Business—Forward-Looking Statements” for more information on the forward-looking statements in this Report
and “Item 1A. Risk Factors” in this Report for factors that could materially influence our results.
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