Crucial 2014 Annual Report Download - page 65

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2014 Debt Restructure
In 2014, we initiated a series of actions to restructure our debt, including exchanges, conversions and settlements,
repurchases, issuances and early repayments. The following table presents the net effect of each of the actions:
Increase
(Decrease) in
Principal
Increase
(Decrease) in
Carrying
Value
Increase
(Decrease) in
Cash (Decrease) in Equity Loss(1)
Exchanges $ 585 $ 282 $ — $ (238) $ 49
Conversions and settlements (770) (437)(1,446)(886) 130
Repurchases (320) (269)(857)(567) 23
Issuances 2,212 2,212 2,157 — —
Early repayments (336) (334)(339) — 3
$ 1,371 $ 1,454 $ (485) $ (1,691) $ 205
(1) The loss on 2014 debt restructure activities was recorded as $184 million in other non-operating expense and
$21 million in interest expense in 2014.
• Exchanges: Exchanged $440 million in aggregate principal amount of our 2027 Notes, 2031A Notes and 2031B
Notes into $1.03 billion principal amount at maturity of 2043G Notes.
• Conversions and Settlements: Holders of substantially all of our remaining 2014 Notes, 2027 Notes and 2031A
Notes (with an aggregate principal amount of $770 million) converted their notes and we settled the conversions
in cash for $1.45 billion.
• Repurchases: Repurchased $320 million in aggregate principal amount of our 2031B Notes, 2032C Notes and
2032D Notes in privately-negotiated transactions for an aggregate of $857 million in cash.
• Issuances: Issued $600 million in principal amount of 5.875% senior notes due February 2022 and $1.15 billion
in principal amount of 5.500% senior notes due February 2025. Issued $462 million in principal amount of
1.258% senior notes due 2019 Notes, payable in 10 semi-annual installments commencing in July 2014.
• Early Repayments: Repaid $334 million of notes and capital leases prior to their scheduled maturities. (See
"Other Notes Payable" below.)
Subsequent to 2014, we settled an aggregate principal amount of $114 million of our remaining 2031B Notes for
$389 million in cash and repaid a $120 million note prior to its scheduled maturity. (See "Other Notes Payable" below.)
The following discussion provides further details of our 2014 debt restructure activities:
Exchanges: During 2014, in a series of separate non-cash transactions, we exchanged portions of our 2027 Notes, 2031A
Notes and 2031B Notes (collectively, the "Exchanged Notes") into 2043G Notes (collectively, the "Exchange Transactions").
In connection with the Exchange Transactions, which were accounted for as extinguishments, we issued to holders of the
Exchanged Notes new 2043G Notes with an aggregate principal amount at issuance of $820 million, which accrete up to a
principal amount at maturity of $1.03 billion (see further discussion in "2043G Notes" below). The liability and equity
components of the Exchanged Notes had previously been stated separately within debt and additional capital in our
consolidated balance sheet. As a result, our accounting for the Exchanged Notes affected debt and equity. In connection with
the Exchange Transactions, we recognized a loss of $49 million based primarily on the difference between the carrying values
and the fair values of the debt components of the Exchanged Notes, of which $38 million was included in other non-operating
expense for 2014. The fair value of the debt component of each of the Exchanged Notes was determined as if they were stand-
alone instruments using interest rates for similar nonconvertible debt issued by entities with credit ratings comparable to ours at
the time of issuance (based on Level 2 fair value measurements). The table below summarizes the Exchange Transactions: