JetBlue Airlines 2010 Annual Report Download - page 66

series of the 5.5% Debentures. The total net proceeds of the offering were approximately $165 million,
after deducting underwriting fees and other transaction related expenses as well as the $32 million escrow
deposit. Interest on the 5.5% Debentures is payable semi-annually on April 15 and October 15.
Holders of the Series A 5.5% Debentures may convert them into shares of our common stock at any time
at a conversion rate of 220.6288 shares per $1,000 principal amount of Series A 5.5% Debenture. Holders
of the Series B 5.5% Debentures may convert them into shares of our common stock at any time at a
conversion rate of 225.2252 shares per $1,000 principal amount of Series B 5.5% Debenture. The
conversion rates are subject to adjustment should we declare common stock dividends or effect any
common stock splits or similar transactions. If the holders convert the 5.5% Debentures in connection with
any fundamental corporate change that occurs prior to October 15, 2013 for the Series A 5.5% Debentures
or October 15, 2015 for the Series B 5.5% Debentures, the applicable conversion rate may be increased
depending upon our then current common stock price. The maximum number of shares of common stock
into which all of the 5.5% Debentures are convertible, including pursuant to this make-whole fundamental
change provision, is 54.4 million shares. Holders who convert their 5.5% 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 the 5.5% 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 5.5% Debentures.
We may redeem any of the 5.5% 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
5.5% Debentures and October 15, 2015 for the Series B 5.5% Debentures. Holders may require us to
repurchase the 5.5% 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 5.5% Debentures and October 15, 2015, 2020, 2025, 2030, and 2035 for the Series B
5.5% 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 5.5% 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 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
5.5% Debentures under the applicable provisions of the Codification. 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 5.5% 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 5.5% 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.
During 2008, approximately $76 million principal amount of the 5.5% 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. During 2009, approximately $3 million principal amount of
the 5.5% Debentures were voluntarily converted by holders into approximately 0.6 million shares of our
common stock. The borrower returned 10.0 million shares to us in September 2009, almost all of which
were voluntarily returned shares in excess of converted shares, pursuant to the share lending agreement. At
December 31, 2010, the remaining principal balance was $123 million, which is currently convertible into
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