eTrade 2008 Annual Report Download - page 136

7
3
⁄ 8 % Senior Notes due September 2013
In 2005, the Company issued an aggregate principal amount of $600 million in senior notes due
September 2013 (“7
3
⁄ 8 % Notes”). Interest is payable semi-annually and the notes are non-callable for four years
and may then be called by the Company at a premium, which declines over time.
In 2007, $87.8 million in principal of the 7
3
⁄ 8 % Notes were exchanged for an equal amount of the 12
1
⁄ 2 %
Springing Lien notes discussed below. In 2008, the Company exchanged $97.5 million in principal of its 7
3
⁄ 8 %
Senior Notes for 21.1 million shares of common stock. This exchange resulted in the Company recording a $19.7
million pre-tax gain on extinguishment.
7
7
⁄ 8 % Senior Notes Due December 2015
In 2005, the Company issued an aggregate principal amount of $300 million in senior notes due
December 2015 (“7
7
⁄ 8 % Notes”). Interest is payable semi-annually and the notes are non-callable for four years
and may then be called by the Company at a premium, which declines over time.
In 2007, $51.8 million in principal of the 7
7
⁄ 8 % Notes were exchanged for an equal amount of the 12
1
⁄ 2 %
Springing Lien notes discussed below. In 2008, the Company exchanged $5.0 million in principal of its 7
7
⁄ 8 %
Senior Notes for 1.1 million shares of common stock. This exchange resulted in the Company recording a $1.0
million pre-tax gain on extinguishment.
Springing Lien Notes
12
1
⁄ 2 % Springing Lien Notes Due November 2017
In November 2007, the Company issued an aggregate principal amount of $1.8 billion in springing lien
notes due November 2017 (“12
1
⁄ 2 % Notes”). Interest is payable semi-annually and the notes are non-callable for
five years and may then be called by the Company at a premium, which declines over time. The Company has
the option to make interest payments on its 12
1
⁄ 2 % Notes in the form of either cash or additional 12
1
⁄ 2 % Notes
through May 2010. During the second quarter of 2008, the Company elected to make its first interest payment of
approximately $121 million in cash. During the fourth quarter of 2008, the Company elected to make its second
interest payment of $121 million in the form of additional springing lien notes. The November 2010 payment is
the first interest payment the Company is required to pay in cash.
The indenture for the Company’s 12
1
⁄ 2 % Notes requires the Company to secure the 12
1
⁄ 2 % Notes with the
property and assets of the Company and any future subsidiary guarantors (subject to certain exceptions). The
requirement to secure the 12
1
⁄ 2 % Notes will occur on the earlier of: (1) the date on which the 8% Notes are
redeemed or (2) the first date on which the Company is allowed to grant liens in excess of $300 million under the
8% Notes. The requirement to secure the 12
1
⁄ 2 % Notes is limited to the amount of debt under the 12
1
⁄ 2 % Notes
that would not trigger a requirement for the Company to equally and ratably secure the existing 8% Notes, 7
3
⁄ 8 %
Notes and the 7
7
⁄ 8 % Notes.
In 2008, the Company issued an additional $150.0 million of 12
1
⁄ 2 % Notes, in accordance with the terms of
the agreement with Citadel. This is the final issuance under the agreement with Citadel. In connection with this
issuance, the Company received $150.0 million in cash.
Mandatory Convertible Notes
6
1
⁄ 8 % Mandatory Convertible Notes Due November 2018
In 2005, the Company issued 18.0 million of mandatory convertible notes (“Units”) with a face value of
$450 million (“6
1
⁄ 8 % Notes”). In 2008, the Company retired the entire $450 million principal amount of the
6
1
⁄ 8 % Notes with the issuance of 25 million shares of common stock at $18 per share (the mandatory conversion
price).
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