Ford 2011 Annual Report Download - page 149

Notes to the Financial Statements
Ford Motor Company | 2011 Annual Report 147
NOTE 18. DEBT AND COMMITMENTS (Continued)
We may terminate the conversion rights related to the 2016 Convertible Notes at any time on or after
November 20, 2014 if the closing price of Ford Common Stock exceeds 130% of the then-applicable conversion price for
20 trading days during any consecutive 30-trading day period. Also, we may redeem for cash all or a portion of the
2036 Convertible Notes at our option at any time or from time to time on or after December 20, 2016 at a price equal to
100% of the principal amount of the 2036 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but not
including, the redemption date. We may terminate the conversion rights related to the 2036 Convertible Notes at any time
on or after December 20, 2013 if the closing price of Ford Common Stock exceeds 140% of the then-applicable
conversion price for 20 trading days during any consecutive 30-trading day period.
Liability, equity, and if-converted components of our Convertible Notes at December 31 are summarized as follows
(in millions):
Liability component
4.25% Debentures due December 15, 2016
4.25% Debentures due December 15, 2016 (underwriter option)
Subtotal Convertible Debt due December 15, 2016
4.25% Debentures due December 20, 2036
Unamortized discount
Net carrying amount
Equity component of outstanding debt (a)
Share value in excess of principal value, if converted (b)
2011
$768
115
883
25
(172)
$736
$(225)
$143
2010
$768
115
883
25
(199)
$709
$(225)
$732
Total Effective Interest Rate
2011
9.2%
8.6%
10.5%
2010
9.2%
8.6%
10.5%
__________
(a) Recorded in Capital in excess of par value of stock.
(b) Based on share price of $10.76 and $16.79 as of December 31, 2011 and 2010, respectively.
We recognized interest cost on our Convertible Notes as follows (in millions):
Contractual interest coupon
Amortization of discount
Total interest cost on Convertible Notes
2011
$38
27
$65
2010
$138
87
$225
2009
$92
59
$151
2010 Conversion Offer. In the fourth quarter of 2010, pursuant to an exchange offer we conducted, about $2 billion
and $554 million principal amount of the 2016 Convertible Notes and 2036 Convertible Notes, respectively, were
exchanged for an aggregate of 274,385,596 shares of Ford Common Stock, $534 million in cash ($215 in cash per
$1,000 principal amount and $190 in cash per $1,000 principal amount of 2016 Convertible Notes and 2036 Convertible
Notes exchanged, respectively) and the applicable accrued and unpaid interest on such 2016 Convertible Notes and
2036 Convertible Notes. As a result of the conversion, we recorded a pre-tax loss of $962 million, net of unamortized
discounts, premiums and fees, in Automotive interest income and other non-operating income/(expense), net.
2009 Conversion Offer. In the second quarter of 2009, pursuant to an exchange offer we conducted, $4.3 billion
principal amount of 2036 Convertible Notes was exchanged for an aggregate of 467,909,227 shares of Ford Common
Stock, $344 million in cash ($80 in cash per $1,000 principal amount of 2036 Convertible Notes exchanged) and the
applicable accrued and unpaid interest on such 2036 Convertible Notes. As a result of the conversion, we recorded a pre-
tax gain of $1.2 billion, net of unamortized discounts, premiums, and fees, in Automotive interest income and other non-
operating income/(expense), net.
Subordinated Convertible Debentures
In the first quarter of 2011, we redeemed in whole the Subordinated Convertible Debentures held by Trust II at a price
of $100.66 per $100 principal amount of such debentures, plus accrued and unpaid interest of $1.08 per debenture. The
proceeds from the redemption of the Subordinated Convertible Debentures were used by Trust II to redeem in whole the
Trust Preferred Securities at a price of $50.33 per $50 liquidation preference of such securities, plus accrued and unpaid
distributions of $0.54 per security. Redemption of these securities resulted in a reduction of about $3 billion in Automotive
debt and lower annualized interest costs of about $190 million. It also resulted in a 2011 first quarter pre-tax charge of
$60 million in Automotive interest income and other non-operating income/(expense), net.