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Note 10 - Long-Term Debt (Notes) | 9 Months Ended
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Sep. 30, 2015
Long-term Debt, Unclassified [Abstract] |
Long-term Debt | Long-Term Debt As described in Note 1, as of June 30, 2015, we early adopted the accounting update related to the presentation of debt issuance costs in financial statements. We believe that presenting long-term debt net of debt issuance costs is preferable as it is consistent with our presentation of debt discounts and premiums. The change in accounting principle has been applied retrospectively to prior periods. As a result, a reclassification of approximately $17.6 million of remaining debt issuance costs was made on our December 31, 2014 consolidated balance sheet, resulting in a reduction in other assets and a reduction in long-term debt; there was no impact on our results of operations or retained earnings. The following illustrates the impact of the reclassification:
|  | December 31, 2014
(In thousands) |  | As Previously Reported |  | Adjustment |  | As Adjusted
9.000% | Senior Notes due 2017 | $ | 192,605 |  |  | $ | (2,360 | ) |  | $ | 190,245 |
3.000% | Convertible Senior Notes due 2017 | 375,310 |  |  | (3,974 | ) |  | 371,336 |
2.250% | Convertible Senior Notes due 2019 | 342,011 |  |  | (5,878 | ) |  | 336,133 |
5.500% | Senior Notes due 2019 | 300,000 |  |  | (5,415 | ) |  | 294,585 |
| Total long-term debt | $ | 1,209,926 |  |  | $ | (17,627 | ) |  | $ | 1,192,299 |
The carrying value of our long-term debt at September 30, 2015 and December 31, 2014 was as follows:
(In thousands) |  | September 30, 2015 |  | December 31, 2014
9.000% | Senior Notes due 2017 | $ | 191,752 |  |  | $ | 190,245 |
3.000% | Convertible Senior Notes due 2017 | 52,754 |  |  | 371,336 |
2.250% | Convertible Senior Notes due 2019 | 346,443 |  |  | 336,133 |
5.500% | Senior Notes due 2019 | 295,472 |  |  | 294,585 |
5.250% | Senior Notes due 2020 | 343,825 |  |  | — |
| Total long-term debt | $ | 1,230,246 |  |  | $ | 1,192,299 |
Senior Notes due 2020 In June 2015, we issued $350 million aggregate principal amount of Senior Notes due 2020 and received net proceeds of approximately $343.5 million. These notes mature on June 15, 2020 and bear interest at a rate of 5.250% per annum, payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 2015. We have the option to redeem these notes, in whole or in part, at any time or from time to time prior to maturity at a redemption price equal to the greater of: (i) 100% of the aggregate principal amount of the notes to be redeemed; or (ii) the make-whole amount, which is the present value of the notes discounted at the applicable treasury rate plus 50 basis points, plus, in each case, accrued interest thereon to the redemption date. The Senior Notes due 2020 have covenants customary for securities of this nature, including covenants related to the payments of the notes, reports, compliance certificates and modification of the covenants. Additionally, the indenture governing the Senior Notes due 2020 includes covenants restricting us from encumbering the capital stock of a designated subsidiary (as defined in the indenture for the notes) or disposing of any capital stock of any designated subsidiary unless either all of the stock is disposed of or we retain more than 80% of the stock. Convertible Senior Notes due 2017 and 2019 Following the pricing of our Senior Notes due 2020, in June 2015, we entered into privately negotiated agreements with certain holders of our Convertible Senior Notes due 2017 to purchase an aggregate principal amount of $389.1 million of our outstanding Convertible Senior Notes due 2017 for a combination of cash and shares of Radian Group common stock. We funded the purchases with $126.8 million in cash (plus accrued and unpaid interest due on the purchased notes) and by issuing to the sellers approximately 28.4 million shares of Radian Group common stock. Our purchases of Convertible Senior Notes due 2017 resulted in a pretax charge of approximately $91.9 million related to these transactions. This charge represents:
• | the $35.5 million market premium representing the consideration paid to the sellers of the Convertible Senior Notes due 2017 in excess of the conversion value of the purchased Convertible Senior Notes due 2017;
• | the $52.3 million difference between the fair value and the carrying value of the liability component of the purchased Convertible Senior Notes due 2017; and
• | the $4.1 million net impact of transaction costs and unamortized debt issuance costs on the purchased Convertible Senior Notes due 2017.
In connection with our June 2015 purchases of Convertible Senior Notes due 2017, we terminated a corresponding portion of the capped call transactions we had entered into in 2010 related to the initial issuance of the Convertible Senior Notes due 2017. As a result of this termination, we received total consideration of approximately $54.9 million, consisting of 2.3 million shares of Radian Group common stock and $12.0 million in cash. In accordance with the accounting standards regarding equity and contracts in an entity’s own equity, the total consideration received was recorded as an increase to additional paid-in capital. The shares of Radian Group common stock received were retired, resulting in a decrease in shares issued and outstanding and a corresponding increase in unissued shares. During the three-month period ended September 30, 2015, our closing stock price exceeded the thresholds required for the holders of our Convertible Senior Notes due 2017 and our Convertible Senior Notes due 2019 to be able to exercise their conversion rights during the three-month period ending December 31, 2015. In any period when holders of the Convertible Senior Notes due 2017 are eligible to exercise their conversion option, the equity component related to these instruments is classified as mezzanine (temporary) equity, because we are required to settle the aggregate principal amount of the notes in cash. If in any future period the conversion threshold requirements of our Convertible Senior Notes due 2017 are not met, then the difference between (1) the amount of cash deliverable upon conversion (i.e., par value of debt) and (2) the carrying value of the debt component will be reclassified from mezzanine equity to permanent equity, and will continue to be reported as permanent equity for any period in which the debt is not currently convertible. Our conversion obligation for the Convertible Senior Notes due 2019 may be satisfied by paying or delivering, as the case may be, cash, shares of Radian Group common stock or a combination of cash and shares of Radian Group common stock, at our election. Issuance and transaction costs incurred at the time of the issuance of the convertible notes are allocated to the liability and equity components in proportion to the allocation of proceeds and are accounted for as debt issuance costs and equity issuance costs, respectively. The convertible notes are reflected on our condensed consolidated balance sheets as follows:
| Convertible Senior Notes due 2017 |  | Convertible Senior Notes due 2019
(In thousands) | September 30, 2015 |  | December 31, 2014 |  | September 30, 2015 |  | December 31, 2014
Liability component: |  |  |  |  |  |  |
Principal | $ | 60,899 |  |  | $ | 450,000 |  |  | $ | 399,992 |  |  | $ | 400,000 |
Debt discount, net (1) | (7,737 | ) |  | (74,690 | ) |  | (48,647 | ) |  | (57,989 | )
Debt issuance costs (1) | (408 | ) |  | (3,974 | ) |  | (4,902 | ) |  | (5,878 | )
Net carrying amount | $ | 52,754 |  |  | $ | 371,336 |  |  | $ | 346,443 |  |  | $ | 336,133 |
Equity component of currently redeemable convertible senior notes | $ | 7,737 |  |  | $ | 74,690 |  |  | $ | — |  |  | $ | — |
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(1) | Included within long-term debt and is being amortized over the life of the convertible notes.
The following tables set forth total interest expense recognized related to the convertible notes for the periods indicated:
| Convertible Senior Notes due 2017
| Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Contractual interest expense | $ | 456 |  |  | $ | 3,375 |  |  | $ | 6,953 |  |  | $ | 10,125 |
Amortization of debt issuance costs | 43 |  |  | 308 |  |  | 659 |  |  | 912 |
Amortization of debt discount | 808 |  |  | 5,441 |  |  | 11,910 |  |  | 15,939 |
Total interest expense | $ | 1,307 |  |  | $ | 9,124 |  |  | $ | 19,522 |  |  | $ | 26,976 |
| Convertible Senior Notes due 2019
| Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Contractual interest expense | $ | 2,250 |  |  | $ | 2,250 |  |  | $ | 6,750 |  |  | $ | 6,750 |
Amortization of debt issuance costs | 317 |  |  | 322 |  |  | 975 |  |  | 957 |
Amortization of debt discount | 3,146 |  |  | 2,980 |  |  | 9,342 |  |  | 8,803 |
Total interest expense | $ | 5,713 |  |  | $ | 5,552 |  |  | $ | 17,067 |  |  | $ | 16,510 |

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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