(8) Borrowings

5.5% senior convertible notes and interest expense

In November 2011, the Company issued $152,000 of 5.50% senior convertible notes due December 2016. These notes are senior unsecured obligations and rank equal in right of payment with all the Company’s existing and future senior unsecured indebtedness. They are also senior in right of payment to any subordinated indebtedness that the Company may incur in the future.

The notes accrue interest at the rate of 5.50% per year payable in cash semi-annually on June 15 and December 15 of each year.

The following table summarizes the principal amounts and related unamortized discount on convertible notes at June 30, 2013 and December 31, 2012:



(in thousands)	2013		2012
Principal amount of convertible notes	$	27,540	$	90,960
Unamortized discount on convertible notes		(2,821)		(10,429)
Net carrying value	$	24,719	$	80,531

These notes are convertible into shares of the Company’s Common Stock at a conversion rate equivalent to 69.9032 shares of Common Stock per $1 principal amount of notes, which represents a conversion rate of approximately $14.31 per share of Common Stock. The conversion rate is subject to adjustment in certain circumstances as more fully set forth in the indenture covering the notes. Conditions for conversion have been satisfied and the notes are convertible. During the second quarter of 2013 note holders converted $20,800 aggregate principal amount of notes, which converted into 1,454 shares of common stock, on a split-adjusted basis. The Company recognized a $3,538 loss on conversion of these notes in interest and other expense, net. During the first six months of 2013, note holders converted $63,420 aggregate principal amount of notes, which converted into 4,433 shares of common stock, on a split-adjusted basis. The Company recognized a $9,253 loss on conversion of these notes in interest and other expense, net.

The remaining notes are convertible into approximately 1,925 shares of common stock. In certain circumstances provided for in the indenture, the number of shares of common stock issuable upon conversion of the notes may be increased, and with it the aggregate principal amount of the notes. Unless earlier repurchased or converted, the notes will mature on December 15, 2016.

The notes were issued with an effective yield of 5.96% based upon an original issue discount at 98.0%. The net proceeds from the issuance of these notes, after deducting original issue discount and capitalized issuance costs of $6,634, amounted to $145,366. The capitalized issuance costs are being amortized to interest expense over the life of the notes, or realized upon conversion of the notes.

Upon certain terms and conditions, the Company may elect to satisfy its conversion obligation with respect to the notes by paying cash, in whole or in part, for specified aggregate principal amount of the notes. In the event of certain types of fundamental changes, the Company will increase the conversion rate by a number of additional shares, up to a maximum of 2,455 shares, which equates to a conversion price of approximately $11.22 per share.