10.	Convertible Senior Notes

November

2005,

we issued

$300.0

million aggregate principal amount of

5.875%

convertible senior notes due

November

30,

2035

. The convertible senior notes are unsecured, subordinate to existing and future secured obligations and structurally subordinate to existing and future claims of our subsidiaries’ creditors. These notes (net of repurchases since the issuance dates) are reflected within convertible senior notes on our consolidated balance sheets.

put rights exist under our convertible senior notes.

August 26, 2019,

we repurchased

$54.4

million in face amount of our outstanding convertible senior notes for

$16.3

million in cash (including accrued interest) and the issuance of a

$17.4

million term note, which bears interest at a fixed rate of

8.0%

and is due in

August 2024.

The repurchase resulted in a gain of approximately

$5.1

million (net of the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon acquisition, the notes were retired. See Note

"Notes Payable and Variable Interest Entities" for further information regarding the note issuance.

The following summarizes (in thousands) components of our consolidated balance sheets associated with our convertible senior notes:

	As of
	December 31, 2019			December 31, 2018
Face amount of convertible senior notes	$	33,839		$	88,280
Discount		(9,748	)		(26,138	)
Net carrying value	$	24,091		$	62,142
Carrying amount of equity component included in paid-in capital	$	108,714		$	108,714
Excess of instruments’ if-converted values over face principal amounts	$	—		$	—

During certain periods and subject to certain conditions, the remaining

$33.8

million of outstanding convertible senior notes as of

December 31, 2019

(as referenced in the table above) are convertible by holders into cash and, if applicable, shares of our common stock at an adjusted effective conversion rate of

40.63

shares of common stock per

$1,000

principal amount of notes, subject to further adjustment; the conversion rate is based on an adjusted conversion price of

$24.61

per share of common stock. Upon any conversion of the notes, we will deliver to holders of the notes cash of up to

$1,000

per

$1,000

aggregate principal amount of notes and, at our option, either cash or shares of our common stock in respect of the remainder of the conversion obligation, if any. The maximum number of shares of common stock that any note holder

may

receive upon conversion is fixed at

40.63

shares per

$1,000

aggregate principal amount of notes, and we have a sufficient number of authorized shares of our common stock to satisfy this conversion obligation. We are required to pay contingent interest on the notes during a

-month period if the average trading price of the notes is above a specified level. Thus far we have

not

paid any contingent interest on these notes. In addition, holders of the notes

may

require us to repurchase the notes for cash upon certain specified events.

In conjunction with the offering of the convertible senior notes, we entered into a

-year share lending agreement with Bear, Stearns International Limited (“BSIL”) and Bear, Stearns & Co. Inc, as agent for BSIL, pursuant to which we lent BSIL

5,677,950

shares of our common stock. The obligations of Bear Stearns were assumed by JP Morgan in

2008.

JP Morgan (as the guarantor of the obligation) is required to return the loaned shares to us at the end of the

-year term of the share lending agreement or earlier upon the occurrence of specified events. Such events include the bankruptcy of JP Morgan, its failure to make payments when due, its failure to post collateral when required or return loaned shares when due, notice of its inability to perform obligations, or its untrue representations. If an event of default occurs, then the borrower (JP Morgan)

may

settle the obligation in cash. Further, in the event that JP Morgan’s credit rating drops below

A/A2,

it would be required to post collateral for the market value of the lent shares (

$13.1

million based on the

1,459,233

shares remaining outstanding under the share lending arrangement as of

December 31, 2019

). JP Morgan has agreed to use the loaned shares for the purpose of directly or indirectly facilitating the hedging of our convertible senior notes by the holders thereof or for such other purpose as reasonably determined by us. We deem it highly remote that any event of default will occur and therefore cash settlement, while an option, is an unlikely scenario. We exclude the loaned shares from earnings per share computations.

We analogize the share lending agreement to a prepaid forward contract, which we have evaluated under applicable accounting guidance. We determined that the instrument was

not

a derivative in its entirety and that the embedded derivative would

not

require separate accounting. The net effect on shareholders’ equity of the shares lent pursuant to the share lending agreement, which includes our requirement to lend the shares and the counterparties’ requirement to return the shares, is the fee received upon our lending of the shares.

Accounting for Convertible Senior Notes

Under applicable accounting literature, the accounting for the issuance of the notes includes (

) allocation of the issuance proceeds between the notes and paid-in capital, (

) establishment of a discount to the face amount of the notes equal to the portion of the issuance proceeds that are allocable to paid-in capital, (

) creation of a deferred tax liability related to the discount on the notes, and (

) an allocation of issuance costs between the portion of such costs considered to be associated with the notes and the portion of such costs considered to be associated with the equity component of the notes’ issuances (i.e., paid-in capital). We are amortizing the discount to the remaining face amount of the notes into interest expense over the expected life of the notes, which results in a corresponding release of associated deferred tax liability. Amortization for the years ended

December 31, 2019

and

2018

totaled

$0.5

million and

$0.6

million, respectively. Actual incurred interest (based on the contractual interest rate) totaled

$3.9

million and

$5.2

million for the years ended

December 31, 2019

and

2018

, respectively. We will amortize the discount remaining at

December 31, 2019

into interest expense over the expected term of the convertible senior notes (currently expected to be

October 2035).

The weighted average effective interest rate for the convertible senior notes was

9.2%

for all periods presented.