eTrade 2001 Annual Report Download - page 147

The line of credit is collateralized by investment securities that are owned by the Company. Borrowings under the line of credit bear
interest at 0.35% above LIBOR (total of 2.226% at December31, 2001). The Company had no borrowings outstanding under this line
of credit at December 31, 2001.
15.SUBORDINATED DEBT
On May 29, 2001, the Company completed a private offering of an aggregate principal amount of $325million of convertible
subordinated notes due May 2008. The notes are convertible, at the option of the holder, into a total of approximately 29.7 million
shares of the Company’ s common stock at a conversion price of $10.925 per share. The notes bear interest at 6.75%, payable
semiannually, and are non-callable for three years and may then be called by the Company at a premium, which declines over time.
The holders have the right to require redemption at a premium in the event of a change in control or other defined redemption event.
Debt issuance costs of $10.5million are included in other assets and are being amortized to interest expense over the term of the notes.
Had these securities been issued at the beginning of the fiscal year, the additional interest expense and issuance costs associated with
the securities would have increased the reported basic and diluted net loss per share to $0.75 for fiscal year 2001.
On February 7, 2000, the Company completed a private offering of an aggregate principal amount of $500million of convertible
subordinated notes due February 2007. On March 17, 2000, the initial purchasers exercised an option to purchase an additional $150
million of the notes. The notes are convertible, at the option of the holder, into a total of 27,542,373 shares of our common stock at a
conversion price of $23.60 per share. The notes bear interest at 6%, payable semiannually, and are non-callable for three years and
may then be called by us at a premium, which declines over time. The holders have the right to require redemption at a premium in the
event of a change in control or other defined redemption events. We used $145.0 million of the $631.3million in net proceeds to pay
the outstanding balance on a $150 million line of credit, which was subsequently dissolved in February 2000. Costs of $19.1 million
were incurred in connection with the issuance of this debt and included in other assets. Through December 31, 2001, approximately
$5.1 million had been amortized as interest expense and $0.2million removed in connection with the extinguishment of the
$214.8million of debt described below.
In February 1997, ETFC sold $29.9 million of units consisting of $13.7 million in 9.5% senior subordinated notes with 198,088
detachable warrants, $16.2 million in 4.0% convertible preferred stock, par value $0.01 (the “Preferred Stock”), and rights to 205,563
contingent warrants. The non–contingent warrants, which in total entitle the bearers to purchase 831,969 shares of E*TRADE common
stock, are exercisable at $2.26 per share with an expiration date of February 28, 2005. The Preferred Stock converted to 5,038,906
shares of common stock upon consummation of ETFC’ s equity offering on July 28, 1998. The contingent warrants, which in total
entitle the bearers to purchase 215,841 shares of E*TRADE common stock, may be exercised upon a change of control or at any time
after February 19, 2002. In June 1999, the Company redeemed all of the outstanding $13.7million face amount of subordinated debt at
par. ETFC wrote off the remaining unamortized discount as an extraordinary loss on the early extinguishment of debt, totaling
approximately $691,000, net of tax.
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In 1994, ETFC issued 17,250 units of subordinated debt at a price of $17.3 million. The units each consisted of $1,000 of 11.5%
subordinated notes due in 2004 and 20 detachable warrants to purchase common stock at a price of $1.91 per share. The total value of
the 345,000 warrants resulted in an original issue discount on the subordinated debt in the amount of $899,300. In June 1999, ETFC
redeemed all of the outstanding $17.3 million face amount of subordinated debt at a price of 105.75% of the principal amount plus
accrued interest resulting in an extraordinary loss on the early extinguishment of debt totaling approximately $1.3 million, net of tax.
Extraordinary Gain (Loss) on Early Extinguishment of Debt
The Company recorded an extraordinary gain (loss) on early extinguishment of debt of $29.3 million, (or $0.08 per basic and diluted
2002. EDGAR Online, Inc.