Debt

9 Months Ended

Sep. 30, 2020

Debt obligations

The aggregate carrying values of our long-term debt obligations and their par values, if different, as of September 30, 2020 and December 31, 2019 are presented in table 3.1 below.


Long-term debt obligations
Table	3.1
(In millions)		September 30, 2020		December 31, 2019
FHLB Advance - 1.91%, due February 2023		$	155.0	$	155.0
5.75% Notes, due August 2023 (par value: $242.3 million)		240.4		$	420.8
5.25% Notes, due August 2028 (par value: $650 million)		638.5		—
9% Debentures, due April 2063 (1)		208.8		256.9
Long-term debt, carrying value		$	1,242.7	$	832.7

(1)Convertible at any time prior to maturity at the holder’s option, at a conversion rate, which is subject to adjustment, of 74.4718 shares per $1,000 principal amount, representing a conversion price of approximately $13.43 per share.

The 5.75% Senior Notes (“5.75% Notes”), 5.25% Senior Notes (5.25% Notes) and 9% Convertible Junior Subordinated Debentures (“9% Debentures”) are obligations of our holding company, MGIC Investment Corporation, and not of its subsidiaries. The Federal Home Loan Bank Advance (the “FHLB Advance”) is an obligation of MGIC.

5.25% Senior Notes

In August 2020, we issued $650 million aggregate principal amount of 5.25% Notes, which are due in 2028 and received net proceeds, after the deduction of underwriting fees, of $640.3 million. Interest on the 5.25% Notes is payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2021. Prior to August 15, 2023, we may redeem the 5.25% Notes at an amount equal to the sum of (a) the greater of: (i) the sum of the principal amount and the make-whole amount; and (ii) 102.625% of principal; and (b) accrued and unpaid interest. The make-whole amount is the excess of: (1) the present value of the remaining principal, premium and interest payments that would be payable with respect to the note if such note were redeemed on August 15, 2023 (at 102.625% of principal), computed using a discount rate equal to the treasury rate specified in the

notes, plus 50 basis points, over (2) the outstanding principal amount of such note.

On and after August 15, 2023, we may redeem the notes at 102.625% of principal; on or after August 15, 2024, we may redeem the notes at 101.313% of principal; and on or after August 15, 2025, we may redeem the notes at 100% of principal; in each case, plus accrued and unpaid interest.

In addition to underwriting fees, we incurred approximately $2.0 million of other expenses associated with the issuance of these notes.

The 5.25% Notes have covenants customary for securities of this nature, including customary events of default and further provide that the trustee or holders of at least 25% in aggregate principal amount of the outstanding 5.25% Notes may declare them immediately due and payable upon the occurrence of certain events of default after the expiration of the applicable grace period. In addition, in the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization relating to the Company or any of its significant subsidiaries, the 5.25% Notes will become due and payable immediately. This description is not intended to be complete in all respects and is qualified in its entirety by the terms of the 5.25% Notes, including their covenants and events of default.

The net proceeds from the 5.25% Notes issuance were used, in part, as (i) cash consideration to purchase $182.7 million of our 5.75% Notes, and (ii) cash consideration to purchase $48.1 million of our 9% Debentures. The balance of the proceeds remains at the holding company.

5.75% notes

In August 2020, we repurchased $182.7 million in aggregate principal of our 5.75% notes at a purchase price of $197.8 million, plus accrued interest using proceeds from the 5.25% Note issuance. The excess of the purchase price over carrying value, plus the write-off of unamortized issuance costs on the par values, is reflected as a loss on debt extinguishment of $16.5 million on our consolidated statement of operations.

9% Debentures

In the third quarter of 2020, we repurchased $48.1 million in aggregate principal of our 9% Debentures at a purchase price of $61.6 million, plus accrued interest using proceeds from the 5.25% Notes issuance. The repurchase of the 9% Debentures resulted in a $10.2 million loss on debt extinguishment on our consolidated statement of operations; a reduction in our shareholder's equity of $2.7 million related to the reacquisition of the equity component of the 9% Debentures; and a reduction in our potentially dilutive shares by approximately 3.6 million shares.

See Note 7 “Debt” in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information pertaining to our debt obligations. As of September 30, 2020 we are in compliance with all of our debt covenants.

Interest payments

Interest payments for the nine months ended September 30, 2020 and 2019 were $44.2 million and $38.5 million, respectively.