eTrade 2009 Annual Report Download - page 148

2008, the Company elected to make its May interest payment of $121 million in cash and its November interest
payment of $121 million in the form of additional 12
1
⁄ 2 % Notes. In 2009, the Company elected to make both the
May and November interest payments of $128.5 million and $54.7 million, respectively, in the form of additional
12
1
⁄ 2 % Notes. The November 2010 payment is the first 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 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 2009, $1.3 billion of the 12
1
⁄ 2 % Notes were exchanged for an equal principal amount of the newly-issued
non-interest-bearing convertible debentures. Refer to the Debt Exchanges section above for more details.
0% Convertible Debentures due August 2019
In August 2009, the Company issued an aggregate principal amount of $1.7 billion in Class A convertible
debentures and $2.3 million in Class B convertible debentures (collectively “convertible debentures”) of non-interest-
bearing notes due August 31, 2019, in exchange for $1.3 billion principal of the 12
1
⁄ 2 % Notes and $0.4 billion
principal of the 8% Notes. The Class A convertible debentures are convertible into the Company’s common stock at a
conversion rate of $1.034 per $1,000 principal amount of Class A convertible debentures. The Class B convertible
debentures are convertible into the Company’s common stock at a conversion rate of $1.551 per $1,000 principal
amount of Class B convertible debentures. The holders of the convertible debentures may convert all or any portion of
the debentures at any time prior to the close of business on the second scheduled trading day immediately preceding
the maturity date. The indenture for the Company’s convertible debentures requires the Company to secure equally and
ratably the convertible debentures to the extent the 12
1
⁄ 2 % Notes are secured. For details on the accounting of the
convertible debentures and the determination of their fair value, see Note 1—Organization, Basis of Presentation and
Summary of Significant Accounting Policies and Note 5—Fair Value Disclosures.
As of December 31, 2009, $718.9 million of the Class A convertible debentures and $2.0 million of the
Class B convertible debentures had been converted into 695.3 million shares and 1.3 million shares, respectively,
of the Company’s common stock.
Corporate Debt Covenants
Certain of the Company’s corporate debt described above have terms which include customary financial
covenants. As of December 31, 2009, the Company was in compliance with all such covenants.
Future Maturities of Corporate Debt
Scheduled principal payments of corporate debt as of December 31, 2009 are as follows (dollars in
thousands):
Years ending December 31,
2010 $ —
2011 3,644
2012 —
2013 414,665
2014 —
Thereafter 2,194,348
Total future principal payments of corporate debt 2,612,657
Unamortized discount and fair value adjustment, net (153,966)
Total corporate debt $2,458,691
145