BEC » Topics » Convertible Notes

These excerpts taken from the BEC 10-K filed Feb 23, 2009.

Convertible Notes

On December 12, 2006, we issued 2.50% unsecured convertible senior notes due 2036 (“Convertible Notes”), for an aggregate principal amount of $600.0 million. The Convertible Notes, which are convertible into shares of our common stock upon the occurrence of certain events, are due on December 15, 2036, unless earlier redeemed, repurchased or converted and carry an interest rate of 2.50% that is payable semi annually and under certain circumstances, beginning with the six-month period beginning December 15, 2012, contingent interest. The Convertible Notes conversion feature allows the holders of the Convertible Notes to convert, in increments of $1,000 principal, their investment into 13.4748 shares of our common stock (equivalent to a conversion price of approximately $74.21 per share of common stock, subject to adjustment). In certain circumstances, the notes may be convertible into cash up to the principal amount and, if applicable, shares of common stock with respect to any excess conversion value. Holders of the Convertible Notes may require us to repurchase all or part of their Convertible Notes on December 15, 2013, 2016, 2021, 2026, and 2031 or upon the occurrence of certain designated events as described within the debt offering memorandum. Also, on or after December 20, 2013, we may redeem all or part of the Convertible Notes. Upon such events, we will repurchase or redeem such Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes being repurchased or redeemed, plus accrued and unpaid interest.

In addition, beginning with the six-month interest period commencing December 15, 2012, we will pay contingent interest in cash during any six-month interest period in which the trading price of the Convertible Notes for each of the five trading days ending on the trading day immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal amount of the Convertible Notes (“Contingent Interest Feature”). During any interest period when contingent interest shall be payable, the contingent interest payable per $1,000 principal amount of the Convertible Notes will equal the greater of 0.2795% and 0.25% of the average trading price of $1,000 principal amount of the Convertible Notes during the five trading days immediately preceding the first day of the applicable six-month interest period.

 

 

BEC 2008 FORM 10-K   61


Table of Contents

Notes to Consolidated Financial Statements (Continued)

(tabular dollar amounts in millions, except amounts per share)

 

This Contingent Interest Feature is an embedded derivative and has been bifurcated and recorded separately in the accompanying consolidated balance sheets in long term debt. The fair value assigned to the embedded derivative was $0.6 million and $1.6 million at December 31, 2008 and 2007 respectively. We utilize a probability weighted valuation model to determine the fair value of the embedded derivative. Changes to the fair value of this embedded derivative are included in interest expense.

We recorded debt issuance costs and debt discounts of $13.9 million in 2006, which are deducted from the total debt outstanding. These capitalized costs are being amortized using the effective interest method at an imputed interest rate of 4.57% over seven years, the minimum life based upon the terms of the debt.

Convertible Notes

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">On December 12, 2006, we issued 2.50% unsecured convertible senior notes due 2036 (“Convertible Notes”), for an aggregate principal amount
of $600.0 million. The Convertible Notes, which are convertible into shares of our common stock upon the occurrence of certain events, are due on December 15, 2036, unless earlier redeemed, repurchased or converted and carry an interest rate of
2.50% that is payable semi annually and under certain circumstances, beginning with the six-month period beginning December 15, 2012, contingent interest. The Convertible Notes conversion feature allows the holders of the Convertible Notes to
convert, in increments of $1,000 principal, their investment into 13.4748 shares of our common stock (equivalent to a conversion price of approximately $74.21 per share of common stock, subject to adjustment). In certain circumstances, the notes may
be convertible into cash up to the principal amount and, if applicable, shares of common stock with respect to any excess conversion value. Holders of the Convertible Notes may require us to repurchase all or part of their Convertible Notes on
December 15, 2013, 2016, 2021, 2026, and 2031 or upon the occurrence of certain designated events as described within the debt offering memorandum. Also, on or after December 20, 2013, we may redeem all or part of the Convertible Notes.
Upon such events, we will repurchase or redeem such Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes being repurchased or redeemed, plus accrued and unpaid interest.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">In addition, beginning with the six-month interest period commencing December 15, 2012, we will pay contingent interest in cash during any six-month
interest period in which the trading price of the Convertible Notes for each of the five trading days ending on the trading day immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal
amount of the Convertible Notes (“Contingent Interest Feature”). During any interest period when contingent interest shall be payable, the contingent interest payable per $1,000 principal amount of the Convertible Notes will equal the
greater of 0.2795% and 0.25% of the average trading price of $1,000 principal amount of the Convertible Notes during the five trading days immediately preceding the first day of the applicable six-month interest period.

STYLE="margin-top:0px;margin-bottom:0px"> 


 












BEC 2008 FORM 10-K 61






Table of Contents



Notes to Consolidated Financial Statements (Continued)

STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center">(tabular dollar amounts in millions, except amounts per share)

SIZE="1"> 


This Contingent Interest Feature is an embedded derivative and has been bifurcated and recorded
separately in the accompanying consolidated balance sheets in long term debt. The fair value assigned to the embedded derivative was $0.6 million and $1.6 million at December 31, 2008 and 2007 respectively. We utilize a probability weighted
valuation model to determine the fair value of the embedded derivative. Changes to the fair value of this embedded derivative are included in interest expense.

FACE="Times New Roman" SIZE="2">We recorded debt issuance costs and debt discounts of $13.9 million in 2006, which are deducted from the total debt outstanding. These capitalized costs are being amortized using the effective interest method at an
imputed interest rate of 4.57% over seven years, the minimum life based upon the terms of the debt.

These excerpts taken from the BEC 10-K filed Feb 29, 2008.

Convertible Notes

On December 12, 2006, we issued 2.50% unsecured convertible senior notes due 2036 (“Convertible Notes”), for an aggregate principal amount of $600.0 million. The Convertible Notes, which are convertible into shares of our common stock upon the occurrence of certain events, are due on December 15, 2036, unless earlier redeemed, repurchased or converted and carry an interest rate of 2.50% that is payable semi annually and under certain circumstances, beginning with the six-month period beginning December 15, 2012, contingent interest. The Convertible Notes conversion feature allows the holders of the Convertible Notes to convert, in increments of $1,000 principal, their investment into 13.4748 shares of our common stock (equivalent to a conversion price of approximately $74.21 per share of common stock, subject to adjustment). In certain circumstances, the notes may be convertible into cash up to the principal amount and, if applicable, shares of common stock with respect to any excess conversion value. Holders of the Convertible Notes may require us to repurchase all or part of their Convertible Notes on December 15, 2013, 2016, 2021, 2026, and 2031 or upon the occurrence of certain designated events as described within the debt offering memorandum. Also, on or after December 20, 2013, we may redeem all or part of the Convertible Notes. Upon such events, we will repurchase or redeem such Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes being repurchased or redeemed, plus accrued and unpaid interest.

In addition, beginning with the six-month interest period commencing December 15, 2012, we will pay contingent interest in cash during any six-month interest period in which the trading price of the Convertible Notes for each of the five trading days ending on the trading day immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal amount of the Convertible Notes (“Contingent Interest Feature”). During any interest period when contingent interest shall be payable, the contingent interest payable per $1,000 principal amount of the Convertible Notes will equal the greater of 0.2795% and 0.25% of the average trading price of $1,000 principal amount of the Convertible Notes during the five trading days immediately preceding the first day of the applicable six-month interest period.

 

64


Table of Contents

Notes to Consolidated Financial Statements (Continued)

(tabular dollar amounts in millions, except amounts per share)

 

This Contingent Interest Feature is an embedded derivative and has been bifurcated and recorded separately in the accompanying consolidated balance sheets in long term debt. The fair value assigned to the embedded derivative was $1.6 million and $1.4 million at December 31, 2007 and 2006 respectively. We utilize a probability weighted valuation model to determine the fair value of the embedded derivative. Changes to the fair value of this embedded derivative are included in interest expense.

We recorded debt issuance costs and debt discounts of $13.9 million in 2006, which are deducted from the total debt outstanding. These capitalized costs are being amortized using the effective interest method at an imputed interest rate of 4.57% over seven years, the minimum life based upon the terms of the debt.

Convertible Notes

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">On December 12, 2006, we issued 2.50% unsecured convertible senior notes due 2036 (“Convertible Notes”), for an aggregate principal amount
of $600.0 million. The Convertible Notes, which are convertible into shares of our common stock upon the occurrence of certain events, are due on December 15, 2036, unless earlier redeemed, repurchased or converted and carry an interest rate of
2.50% that is payable semi annually and under certain circumstances, beginning with the six-month period beginning December 15, 2012, contingent interest. The Convertible Notes conversion feature allows the holders of the Convertible Notes to
convert, in increments of $1,000 principal, their investment into 13.4748 shares of our common stock (equivalent to a conversion price of approximately $74.21 per share of common stock, subject to adjustment). In certain circumstances, the notes may
be convertible into cash up to the principal amount and, if applicable, shares of common stock with respect to any excess conversion value. Holders of the Convertible Notes may require us to repurchase all or part of their Convertible Notes on
December 15, 2013, 2016, 2021, 2026, and 2031 or upon the occurrence of certain designated events as described within the debt offering memorandum. Also, on or after December 20, 2013, we may redeem all or part of the Convertible Notes.
Upon such events, we will repurchase or redeem such Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes being repurchased or redeemed, plus accrued and unpaid interest.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">In addition, beginning with the six-month interest period commencing December 15, 2012, we will pay contingent interest in cash during any six-month
interest period in which the trading price of the Convertible Notes for each of the five trading days ending on the trading day immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal
amount of the Convertible Notes (“Contingent Interest Feature”). During any interest period when contingent interest shall be payable, the contingent interest payable per $1,000 principal amount of the Convertible Notes will equal the
greater of 0.2795% and 0.25% of the average trading price of $1,000 principal amount of the Convertible Notes during the five trading days immediately preceding the first day of the applicable six-month interest period.

STYLE="margin-top:0px;margin-bottom:0px"> 


64







Table of Contents



Notes to Consolidated Financial Statements (Continued)

STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center">(tabular dollar amounts in millions, except amounts per share)

SIZE="1"> 


This Contingent Interest Feature is an embedded derivative and has been bifurcated and recorded
separately in the accompanying consolidated balance sheets in long term debt. The fair value assigned to the embedded derivative was $1.6 million and $1.4 million at December 31, 2007 and 2006 respectively. We utilize a probability weighted
valuation model to determine the fair value of the embedded derivative. Changes to the fair value of this embedded derivative are included in interest expense.

FACE="Times New Roman" SIZE="2">We recorded debt issuance costs and debt discounts of $13.9 million in 2006, which are deducted from the total debt outstanding. These capitalized costs are being amortized using the effective interest method at an
imputed interest rate of 4.57% over seven years, the minimum life based upon the terms of the debt.

This excerpt taken from the BEC 10-K filed Feb 26, 2007.

Convertible Notes

On December 12, 2006, the Company finalized its convertible note offering and issued 2.50% convertible senior notes due 2036 (“Convertible Notes”), for an aggregate principal amount of $600.0 million. The Convertible Notes, which are convertible into shares of the Company’s common stock upon the occurrence of certain events, are due on December 15, 2036, unless earlier redeemed, repurchased or converted and carry an interest rate of 2.50% that is payable semi annually and under certain circumstances, beginning with the six-month period beginning December 15, 2012, contingent interest. The Convertible Notes conversion feature allows the holders of the Convertible Notes to convert, in increments of $1,000 principal, their investment into 13.4748 shares of the Company’s common stock (equivalent to a conversion price of approximately $74.21 per share of common stock, subject to adjustment). In certain circumstances, the notes may be convertible into cash up to the principal amount and, if applicable, shares of common stock with respect to any excess conversion value. Holders of the Convertible Notes may require the Company to repurchase all or part of their Convertible Notes on December 15, 2013, 2016, 2021, 2026, and 2031 or upon the occurrence of certain designated events as described within the debt offering memorandum. Also, on or after December 20, 2013, the Company may redeem all or part of the Convertible Notes. Upon such events, the Company will repurchase or redeem such Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes being repurchased or redeemed, plus accrued and unpaid interest.

In addition, beginning with the six-month interest period commencing December 15, 2012, the Company will pay contingent interest in cash during any six-month interest period in which the trading price of the Convertible Notes for each of the five trading days ending on the trading day immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal amount of the Convertible Notes (“Contingent Interest Feature”). During any interest period when contingent interest shall be payable, the contingent interest payable per $1,000 principal amount of the Convertible Notes will equal the greater of 0.2795% and 0.25% of the average trading price of $1,000 principal amount of the Convertible Notes during the five trading days immediately preceding the first day of the applicable six-month interest period.

 

64


Table of Contents

Notes to Consolidated Financial Statements (Continued)

(tabular dollar amounts in millions, except amounts per share)

 

This Contingent Interest Feature is an embedded derivative and has been bifurcated and recorded separately in the accompanying consolidated balance sheets in long term debt. The initial fair value assigned to the embedded derivative was $1.4 million. The Company utilizes a probability weighted valuation model to determine the fair value of the embedded derivative. Changes to the fair value of this embedded derivative will be reflected as an adjustment to interest expense in future periods.

Additionally, the Company will file a shelf registration statement no later than 270 days after the issuance of the notes. If the registration statement is not filed or has not become effective within the time period, the Company will be required to pay additional interest to the holders of the notes. The additional interest is at a rate of .25% for the first 90 days after occurrence and .50% after 90 days but will not accrue after the 2nd anniversary date of the convertible notes offering.

The Company recorded debt issuance costs and debt discounts of $13.9 million. These capitalized costs will be amortized using the effective interest method over seven years, the minimum life based upon the terms of the debt.

"Convertible Notes" elsewhere:

CDC Corporation (CHINA)
Comverge (COMV)
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