JetBlue Airlines 2008 Annual Report Download - page 61

stock price. The maximum number of shares of common stock into which all Debentures are convertible,
including pursuant to this make-whole fundamental change provision, is 54.4 million shares. Holders who
convert their Debentures prior to April 15, 2011 will receive, in addition to the number of shares of our
common stock calculated at the applicable conversion rate, a cash payment from the escrow account for
Debentures of the series converted equal to the sum of the remaining interest payments that would have
been due on or before April 15, 2011 in respect of the converted Debentures.
We may redeem any of the Debentures for cash at a redemption price of 100% of their principal amount,
plus accrued and unpaid interest at any time on or after October 15, 2013 for the Series A Debentures and
October 15, 2015 for the Series B Debentures.
Holders may require us to repurchase the Debentures for cash at a repurchase price equal to 100% of their
principal amount plus accrued and unpaid interest, if any, on October 15, 2013, 2018, 2023, 2028, and
2033 for the Series A Debentures and October 15, 2015, 2020, 2025, 2030, and 2035 for the Series B
Debentures; or at any time prior to their maturity upon the occurrence of a specified designated event.
On June 4, 2008, in conjunction with the public offering of the Debentures described above, we also
entered into a share lending agreement with Morgan Stanley & Co. Incorporated, an affiliate of the
underwriter of the offering, or the share borrower, pursuant to which we loaned the share borrower
approximately 44.9 million shares of our common stock. Under the share lending agreement, the share
borrower sold the borrowed shares of JetBlue common stock in a registered public offering and used the
short position resulting from the sale of the shares of our common stock to facilitate the establishment of
hedge positions by investors in the Debentures offering. The common stock was sold at a price of $3.70
per share. Under the share lending agreement, the share borrower is required to return the borrowed shares
when the debentures are no longer outstanding. We did not receive any proceeds from the sale of the
borrowed shares by the share borrower, but we did receive a nominal lending fee of $0.01 per share from
the share borrower for the use of borrowed shares.
We evaluated the various embedded derivatives within the supplemental indenture for bifurcation from the
Debentures under the applicable provisions. Based upon our detailed assessment, we concluded these
embedded derivatives were either (i) excluded from bifurcation as a result of being clearly and closely
related to the Debentures or are indexed to our common stock and would be classified in stockholders’
equity if freestanding or (ii) the fair value of the embedded derivatives was determined to be immaterial.
The net proceeds from our public offering of the Debentures described above were used for the repurchase
of substantially all of our $175 million principal amount of 3.5% convertible notes due 2033, issued in
July 2003, which became subject to repurchase at the holders’ option on July 15, 2008 (see (8) below).
Through December 31, 2008, approximately $76 million principal amount of the Debentures were
voluntarily converted by holders. As a result, we issued 16.9 million shares of our common stock. Cash
payments from the escrow accounts related to these conversions were $11 million, and borrowed shares
equivalent to the number of shares of our common stock issued upon these conversions were returned to
us pursuant to the share lending agreement described above. At December 31, 2008, the remaining
principal balance is $126 million, which is currently convertible into 28.0 million shares of our common
stock. At December 31, 2008, the amount remaining in these escrow accounts was $17 million, which is
reflected as restricted cash on our condensed consolidated balance sheets.
(8) In July 2003, we sold $175 million aggregate principal amount of 3.5% convertible unsecured notes due
2033, which are currently convertible into 6.2 million shares of our common stock at a price of
approximately $28.33 per share, or 35.2941 shares per $1,000 principal amount of notes, subject to further
adjustment and certain conditions on conversion. In July 2008, holders required us to repurchase
approximately $174 million principal amount of the notes at par, plus accrued interest upon the first
repurchase date. Interest is payable semi-annually on January 15 and July 15.
(9) At December 31, 2008 and 2007, four capital leased Airbus A320 aircraft are included in property and
equipment at a cost of $152 million with accumulated amortization of $9 million and $4 million,
respectively. The future minimum lease payments under these noncancelable leases are $15 million per
year through 2011, $14 million per year in 2012 and 2013 and $138 million in the years thereafter.
Included in the future minimum lease payments is $70 million representing interest, resulting in a present
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