Charles Schwab 2010 Annual Report Download - page 83

THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
13. Borrowings
Long-term debt including unamortized debt discounts and premiums, where applicable, consists of the following:
CSC has a universal automatic shelf registration statement on file with the Securities and Exchange Commission (SEC), which
enables CSC to issue debt, equity and other securities. In the third quarter of 2010, the Company issued $700 million of additional
Senior Notes that mature in 2020 under this registration statement. These Senior Notes have a fixed interest rate of 4.45% with
interest payable semi-annually. In 2009, the Company issued $750 million of Senior Notes that mature in 2014 under this registration
statement. These Senior Notes have a fixed interest rate of 4.950% with interest payable semi-annually.
The Senior Medium-Term Notes, Series A (Medium-Term Notes) outstanding at December 31, 2010, mature in 2017 and have a
fixed interest rate of 6.375% with interest payable semi-annually. In 2010, $200 million of Medium-Term Notes matured. At
December 31, 2009, the Medium-Term Notes carried a weighted-average interest rate of 7.12%.
CSC and Schwab Capital Trust I, a statutory trust formed under the laws of the State of Delaware (Trust), previously closed a public
offering of $300 million of the Trust’s fixed to floating-rate trust preferred securities. The proceeds from the sale of the trust preferred
securities were invested by the Trust in fixed to floating rate Junior Subordinated Notes issued by CSC. The Junior Subordinated
Notes, which mature in 2067, have a fixed interest rate of 7.50% until 2017, and a floating rate thereafter. The Junior Subordinated
Notes may be redeemed at a redemption price of principal plus accrued but unpaid interest on November 15, 2017, on or after
November 15, 2037, or following the occurrence of certain events, and at a make-whole redemption price at any other time. In 2010,
the Company terminated the replacement capital covenant related to the trust preferred securities, upon receiving the requisite
consents, in order to have more flexibility to manage its capital structure. The replacement capital covenant had restricted the
Company from redeeming, repaying or purchasing the Junior Subordinated Notes or the trust preferred securities unless it received
proceeds of the issuance of certain replacement capital securities, among other conditions. In 2009, the Company repurchased
$98 million of trust preferred securities related to its Junior Subordinated Notes for a cash payment of $67 million. The repurchase of
the trust preferred securities was considered an extinguishment of a portion of the Junior Subordinated Notes and resulted in a gain of
$31 million.
Schwab has a finance lease obligation related to an office building and land under a 20-year lease. The remaining finance lease
obligation of $106 million at December 31, 2010, is being reduced by a portion of the lease payments over the remaining lease term
of 14 years.
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December 31, 2010 2009
Senior Notes $1,449 $747
Senior Medium-Term Notes, Series A
249 45
0
Junior Subordinated Notes 202 202
Finance lease obli
g
ation 106 111
Fair value ad
j
ustment
—
2
Total lon
g
-term debt $ 2,006 $ 1,512