On June 8, 2011, the Company issued $46 million of convertible unsecured subordinated debentures (the "Series B Debentures") on a bought deal basis. The Series B Debentures have a face value of $1,000, bear interest at the rate of 7.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on December 31, 2011 and mature on June 30, 2017 ("Maturity Date"). The Series B Debentures are convertible at the holder's option at a conversion price of $1.70 per common share (the "Conversion Price"), subject to adjustment in certain events. The Series B Debentures are not redeemable by the Company before June 30, 2014. On and after June 30, 2014 and prior to June 30, 2016, the Series B Debentures are redeemable at the Company's option, in whole or in part, at a price equal to their principal amount plus accrued and unpaid interest if the weighted average trading price of the common shares on the Toronto Stock Exchange for the 20 consecutive trading days preceding the date on which the notice of redemption is given is not less than 125% of the Conversion Price. On or after June 30, 2016 and prior to the Maturity Date, the Series B Debentures may be redeemed in whole or in part at the option of the Company on not more than 60 days and not less than 30 days prior notice at a price equal to their principal amount plus accrued and unpaid interest. The Series B Debentures are listed and posted for trading on the TSX under the symbol "AXL.DB.B".
Both the Series A and the Series B Debentures were determined to be compound instruments. As the Series A and Series B Debentures are convertible into common shares, the liability and equity components are presented separately. The initial carrying amount of the financial liability is determined by discounting the stream of future payments of interest and principal. Using the residual method, the carrying amount of the conversion feature is the difference between the principal amount and the carrying value of the financial liability. The Series A and Series B Debentures, net of the equity component and issue costs are accreted using the effective interest rate method over the term of the Series A and Series B Debentures, such that the carrying amount of the financial liability will equal the $50 million and $46 million principal balance at maturity respectively.
The following table indicates the convertible debenture activities:
Debt Equity Proceeds component componentBalance, December 31, 2010 $ 47,700 $ 43,460 $ 2,592Issue of Series B Debentures (1) 46,000 41,849 4,151Issue costs (2,140) (1,947) (193)Deferred tax - - (1,531)Accretion expense - 1,434 - -----------------------------------------Balance, December 31, 2011 $ 91,560 $ 84,796 $ 5,019Accretion expense - 1,957 - -----------------------------------------Balance, December 31, 2012 $ 91,560 $ 86,753 $ 5,019----------------------------------------------------------------------------(1) Includes 1,575 Series B Debentures issued to management and directors for total gross proceeds of $1.6 million.10. DECOMMISSIONING OBLIGATIONS December December 31, 2012 31, 2011Balance at January 1 $ 62,848 $ 51,550 Provisions incurred 1,187 4,878 Total abandonment expenditures (506) (249) Provisions disposed (20,865) (1,316) Change in estimates 2,735 6,355 Accretion expense 1,068 1,630 -------------------------Ending balance $ 46,467 $ 62,848---------------------------------------------------------------------------
