7. Senior Notes

The following table discloses certain information regarding the Company’s fixed-rate Senior Notes (in millions):


	Carrying Value at December 31,				Coupon Rate at December 31, 2013	Effective Interest Rate at December 31, 2013	Maturity Date at December 31, 2013
	2013		2012		Coupon Rate at December 31, 2013	Effective Interest Rate at December 31, 2013	Maturity Date at December 31, 2013
Unsecured indebtedness:
Senior Notes	$	2,425.2	$	1,825.2	3.375% – 9.625%	3.5% – 9.9%	May 2015 - May 2023
Senior Notes — Premium, net		0.2		4.0
Senior Convertible Notes due 2040, net^(A)		328.7		317.9	1.75%	5.3%	November 2040

Total Senior Notes	$	2,754.1	$	2,147.1

(A)

The Company may redeem the senior convertible notes any time on or after November 15, 2015, in whole or in part, for cash equal to 100% of the principal amount of the notes plus accrued and unpaid interest through, but excluding, the redemption date. The holders of the senior convertible notes may require the Company to repurchase their notes in whole or in part on specified dates, the first of which is November 15, 2015.

In 2013, the Company issued $300 million aggregate principal amount of 3.375% senior unsecured notes due May 2023 and $300 million aggregate principal amount of 3.50% senior unsecured notes due January 2021. The notes were offered to investors at a discount to par of 99.397% and 99.327%, respectively. The Company used the net proceeds to partially fund the purchase price for and repay mortgage debt assumed in connection with the Blackstone Acquisition (Note 3).

The senior convertible notes are senior unsecured obligations and rank equally with all other senior unsecured indebtedness of the Company. The senior convertible notes may be converted prior to maturity into cash equal to the lesser of the principal amount of the note or the conversion value and, to the extent the conversion value exceeds the principal amount of the note, the Company’s common shares. The senior convertible notes are subject to net settlement based on conversion prices (“Conversion Price”) that are subject to adjustment based on increases in the Company’s quarterly common share dividend. If certain conditions are met, the incremental value can be settled in cash or in the Company’s common shares at the Company’s option. The senior convertible notes may only be converted prior to maturity based on certain provisions in the governing note documents. In connection with the issuance of these notes, the Company entered into a registration rights agreement for the common shares that may be issuable upon conversion of the senior convertible notes. The senior convertible notes due 2040 have a conversion price of $15.33 and $15.76 at December 31, 2013 and 2012, respectively. The senior convertible notes due 2040 are convertible based on certain circumstances including, but not limited to, the Company’s closing sale price of its common shares for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than 125% of the conversion price per common share in effect on the applicable trading day.

The Company’s carrying amounts of its debt and equity balances for the senior convertible notes are as follows (in thousands):


	December 31,
	2013			2012
Carrying value of equity component	$	52,497		$	52,497

Principal amount of senior convertible notes	$	350,000		$	350,000
Remaining unamortized debt discount		(21,331	)		(32,120	)

Net carrying value of senior convertible notes	$	328,669		$	317,880

As of December 31, 2013, the remaining amortization period for the debt discount was 22 months for the senior convertible notes, the period during which the debt is expected to be outstanding (i.e., through the first optional redemption date or maturity date).

The Company’s various fixed-rate senior notes have interest coupon rates averaging 5.3% and 5.8% at December 31, 2013 and 2012, respectively. Senior notes with an aggregate principal amount of $82.2 million may not be redeemed by the Company prior to maturity and will not be subject to any sinking fund requirements. The remaining senior notes may be redeemed based upon a yield maintenance calculation.

The fixed-rate senior notes and senior convertible notes were issued pursuant to indentures that contain certain covenants, including limitation on incurrence of debt, maintenance of unencumbered real estate assets and debt service coverage. The covenants also require that the cumulative dividends declared or paid from December 31, 1993, through the end of the current period cannot exceed Funds From Operations (as defined in the agreement) plus an additional $20.0 million for the same period unless required to maintain REIT status. Interest is paid semiannually in arrears. At December 31, 2013, the Company was in compliance with all of the financial and other covenants.

During the years ended December 31, 2012 and 2011, the Company purchased $60.0 million and $36.1 million, respectively, aggregate principal amount of its outstanding senior unsecured notes. The Company recorded a net loss on retirement of $13.5 million and $0.1 million in 2012 and 2011, respectively. The Company allocated the consideration paid for the senior convertible notes due 2011 and 2012 ($19.4 million repurchased in 2011) between the liability components and equity components based on the fair value of those components immediately prior to the purchases and recorded a gain based on the difference in the amount of consideration paid as compared to the carrying amount of the debt, net of the unamortized discount.