Computer Associates 2010 Annual Report Download - page 83

Senior note obligations
As of March 31, 2010 and 2009, the Company had the following unsecured, fixed-rate interest, senior note obligations
outstanding:
(IN MILLIONS) 2010 2009
YEAR ENDED MARCH 31,
5.375% Senior Notes due November 2019 $ 750 $—
1.625% Convertible Senior Notes due December 2009, net of debt amortization amount of $29 million —431
4.750% Senior Notes due December 2009 —176
6.125% Senior Notes due December 2014 501 500
5.375% Senior notes due November 2019
During the third quarter of fiscal year 2010, the Company issued approximately $750 million principal amount of
5.375% Senior Notes due 2019 (the 5.375% Senior Notes). The 5.375% Senior Notes were issued in an underwritten offering
at a price equal to 99.162% of the principal amount. The net proceeds of the offering were approximately $738 million, after
being issued at a discount of approximately $6 million and deducting expenses, underwriting discounts and commissions of
approximately $6 million, which will be amortized over the term of the 5.375% Senior Notes. As of March 31, 2010, the
principal amount of the 5.375% Senior Notes of approximately $744 million, net of unamortized debt discount of
approximately $6 million, is included in the “Long-term debt, net of current portion” line item in the Consolidated Balance
Sheet. The 5.375% Senior Notes are senior unsecured obligations and rank equally in right of payment with all of the
Company’s other existing and future senior unsecured indebtedness. The 5.375% Senior Notes are subordinated to any future
secured indebtedness to the extent of the assets securing such future indebtedness and structurally subordinated to any
indebtedness of the Company’s subsidiaries.
The Company has the option to redeem the 5.375% Senior Notes at any time, at redemption prices equal to the greater of
(i) the principal amount of the 5.375% Senior Notes to be redeemed or (ii) the sum of the present value of the remaining
scheduled payments of the 5.375% Senior Notes to be redeemed, discounted to the date of redemption on a semi-annual
basis at the treasury rate plus 30 basis points. In the event of a change in control, the Company must repurchase the
5.375% Senior Notes in cash at 101% of the principal amount plus accrued and unpaid interest, if any, to the date of
repurchase.
1.625% Convertible senior notes due December 2009
In fiscal year 2003, the Company issued $460 million of unsecured 1.625% Convertible Senior Notes (the 1.625% Notes) due
December 2009, in a transaction pursuant to Rule 144A. The 1.625% Notes were senior unsecured indebtedness and ranked
equally with all existing senior unsecured indebtedness. Concurrent with the issuance of the 1.625% Notes, the Company
entered into call spread repurchase option transactions (1.625% Notes Call Spread) to partially mitigate potential dilution
from conversion of the 1.625% Notes. The Company repaid the 1.625% Notes for approximately $520 million, of which
approximately $460 million was for the outstanding principal amount of the 1.625% Notes and approximately $60 million
was for the in-the-money conversion of the 1.625% Notes Call Spread. The Company also exercised the 1.625% Notes Call
Spread and the option proceeds of approximately $61 million were recorded in “Additional paid-in capital” in the Consolidated
Balance Sheet at March 31, 2010.
The Company estimated a borrowing rate of 11% for a similar non-convertible instrument at the time the unsecured
1.625% Convertible Senior Notes due December 2009 (the 1.625% Notes) were issued. The carrying value at issuance of the
liability component of the 1.625% Notes, assuming an interest rate of 11%, was $251 million at issuance, reflecting a
discount of $209 million. This discount was amortized to interest expense over a seven-year period ending December 2009,
the date on which holders of the 1.625% Notes could first require the Company to exchange all or a portion of their
1.625% Notes for shares of the Company’s common stock at a price of $20.04 per share.
Total interest expense associated with the 1.625% Notes was approximately $34 million and $45 million for the fiscal years
ended March 31, 2010 and 2009, respectively. Interest expense included amortization expense from the debt discount of
approximately $29 million and $37 million for the fiscal years ended March 31, 2010 and 2009, respectively.
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