debt discount that represented the equity component of the 2022 Notes at their inception. The remaining unamortized amount of the debt discount of the 2022 Notes was $13.9 million and $16.5
million at December 31, 2017 and 2016, respectively.
Convertible Senior Notes Due 2032
In March 2012, we completed a public offering and sale of our 2032 Notes in the aggregate principal amount of $200 million, $60 million of
which are currently outstanding. The 2032 Notes bear interest at a rate of 3.25% per annum, and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2012. The 2032 Notes
mature on March 15, 2032, unless earlier converted, redeemed or repurchased. The 2032 Notes are convertible in certain circumstances and during certain periods at an initial conversion rate of 39.9752 shares of our common stock per $1,000
principal amount (which represents an initial conversion price of approximately $25.02 per share of common stock), subject to adjustment in certain circumstances as set forth in the indenture governing the 2032 Notes. We have the right and the
intention to settle any such future conversions in cash.
Prior to March 20, 2018, the 2032 Notes are not redeemable. On
or after March 20, 2018, we, at our option, may redeem some or all of the 2032 Notes in cash, at any time upon at least 30 days notice, at a price equal to 100% of the principal amount plus accrued and unpaid interest (including
contingent interest, if any) up to but excluding the redemption date. In addition, the holders of the 2032 Notes may require us to purchase in cash some or all of their 2032 Notes at a repurchase price equal to 100% of the principal amount of the
2032 Notes, plus accrued and unpaid interest (including contingent interest, if any) up to but excluding the applicable repurchase date, on March 15, 2018, March 15, 2022 and March 15, 2027, or, subject to specified exceptions,
at any time prior to the 2032 Notes maturity following a fundamental change, as defined in the indenture governing the 2032 Notes. We elected to repurchase $7.3 million, $7.6 million and $125 million, respectively, in aggregate
principal amount of the 2032 Notes in June, July and November of 2016, respectively. For the year ended December 31, 2016, we recognized a net loss of $3.5 million related to the repurchase of the 2032 Notes.
The 2032 Notes are accounted for by separating the net proceeds between long-term debt and shareholders equity. In connection with
the issuance of the 2032 Notes, we recorded a debt discount of $35.4 million and a separate the equity component of $22.5 million. To arrive at the debt value, we estimated the fair value of the liability component of the 2032 Notes as of
March 12, 2012 using an income approach. To determine this estimated fair value, we used borrowing rates of similar market transactions involving comparable liabilities at the time of pricing and an expected life of 6.0 years. In selecting the
expected life, we selected the earliest date the holders could require us to repurchase all or a portion of the 2032 Notes (March 15, 2018). The effective interest rate for the 2032 Notes is 6.9% after considering the effect of the accretion of the
related debt discount that represented the equity component of the 2032 Notes at their inception. The remaining unamortized amount of the debt discount of the 2032 Notes was $0.5 million and $2.6 million at December 31, 2017 and 2016,
respectively.
We intend to repurchase all of the 2032 Notes pursuant to the Repurchase Offer. To the extent that any of the
2032 Notes are not purchased in the Repurchase Offer, we may use a portion of the net proceeds from this offering to repurchase or redeem the remaining 2032 Notes. This prospectus supplement does not constitute an offer to purchase or the
solicitation of an offer to sell the 2032 Notes nor does this prospectus supplement constitute a notice of redemption.
MARAD Debt
This U.S. government guaranteed financing (the MARAD Debt), pursuant to Title XI of the Merchant Marine Act of 1936
administered by the Maritime Administration, was used to finance the construction of the Q4000. The MARAD Debt is collateralized by the Q4000 and is guaranteed 50% by us. The MARAD Debt is payable in equal semi-annual installments, matures in
February 2027 and bears interest at a rate of 4.93%.
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