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LIBERTY MUTUAL HOLDING COMPANY INC. <br />Notes to Consolidated Financial Statements <br />(dollars in millions, except per share amounts) <br />(unaudited) <br />(4) DEBT OUTSTANDING <br />Debt outstanding at December 31, 2007, and 2006, includes the following: <br />Short-term debt: <br />2007 <br />2006 <br />Commercial paper <br />Revolving credit facilities <br />Cuttent maturities of long-term debt <br />Total short-term debt <br />S - $ - <br />70 50 <br />21 121 <br />$ 91 $171 <br />Long-term debt: <br />6.75% Notes, due 2008 <br />5.00% Notes, due 2008 <br />8.00% Notes, due 2013 <br />5.75% Notes, due 2014 <br />7.30% Notes, due 2014' <br />6.70% Notes, due 2016 <br />7.00% Subordinated Notes, due 20672 <br />8.50% Surplus Notes, due 2025 <br />7.875% Surplus Notes, due 2026 <br />7.63% Notes, due 2028 <br />7.00% Notes, due 2034 <br />6.50% Notes, due 2035 <br />7.50% Notes, due 2036 <br />7.80% Subordinated Notes, due 2087; <br />7.697°/ Surplus Notes, due 2097 <br />7.10% - 7.86% Medium Term Notes, with various maturities <br />2007 2006 <br />$ - $ IS <br />- 4 <br />260 260 <br />500 500 <br />200 - <br />250 250 <br />300 - <br />150 150 <br />250 250 <br />3 3 <br />250 250 <br />500 500 <br />500 500 <br />700 - <br />500 500 <br />25 27 <br />4,388 3,209 <br />Unamortized discount° (28) (34) <br />Total long-tertn debt excluding current maturities $4,360 $3,175 <br />' Assumed as part of Ohio Casualty acquisition on August 24, 2007. <br />z The par value call date and final fixed rate interest payment date is March 15, 2017, subject to certain requirements <br />s The par value call date and final fixed rate interest payment date is March 15, 2037, subject to certain requirements <br />° Reflects purchase accounting adjustment of $7 related to the $200 Ohio Casualty Notes due in 2014. <br />Shore-term Debt <br />The Company issues commercial paper to meet short-term operating needs. The total facility was $1,000 at December 31, 2007, and $600 at December 31, 2006, and is <br />supported by a $750 Gne of credit facility. Commercial paper issued and outstanding at December 31, 2007, and 2006, was $0. <br />On April 5, 2007, Liberty Mutual Group Inc. ("LMGI'~ entered into a $250 3-yeaz unsecured revolving credit facility for general corporate purposes. No funds have <br />been borrowed to date under the facility. <br />On May 4, 2007, I.MIC redeemed its $121 8.20% Surplus Note at maturity. <br />Long-term Debt <br />On August 24, 2007, the Company assumed $200 of 7.30% Notes due 2014 as a result of the Ohio Casualty acquisition (the "OCAS Notes'. The fair value of the <br />OCAS Notes as established as a result of Ohio Casualty purchase accounting is $207 and is reFlected in the Consolidated Balance Sheets. <br />Payments of interest and principal of the surplus notes are expressly subordinate to all policyholder claims and other obhgations of LMIC. Accordingly, interest and <br />principal payments are contingent upon prior approval of the Commissioner of Insurance of the Commonwealth of Massachusetts. <br />At December 31, 2007, all of the long-term borrowings mature after 2011 <br />On March 7, 2007, LMGI issued junior subordinated notes (the "Notes'? with a face amount of $1,000, consisting of $700 Series A junior subordinated notes (the <br />"Series A Notes' and $300 Series B junior subordinated notes (the "Series B Notes"). The Notes are scheduled for redemption on March I5, 2037; the final maturity of <br />the Series A Notes is March 7, 2087; and the Final maturity of the Series B Notes is March 7, 2067. LMGI may redeem (a) the Series B Notes in whole or in part, on <br />Match 15, 2017, and on each interest payment date thereafter at their principal amount plus accrued and unpaid interest to the date of redemption, or (b) prior to March <br />15, 2037, for the Series A Notes or March 15, 2017, for the Series B Notes, () in whole or in part at any time at their principal amount ot, if greater, a make-whole price, <br />or (u) in certain circumstances, in whole at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, a special event make-whole <br />price. Interest is payable semi-annually at a faced rate of 7.800% for the Series A Notes and 7.000% for the Series B Notes up to, but excluding, the ftnal fixed rate <br />interest payment date. In the event the Notes are not redeemed on or before the final fixed rate interest payment date, interest will accrue at an annual rate of three- <br />month LIBOR plus 3.576% for the Series A Notes and three-month LIBOR plus 2.905% for the Series B Notes, payable quarterly in arrears. LMGI has the right to <br />defer interest payments on the Notes for a period up to ten years. Interest compounds during periods of deferral. In connection with the issuance of the Notes, LMGI <br />entered into a Replacement Capital Covenant ("RCC'. As part of the RCC, LMGI agreed that it will not repay, redeem, defease or purchase the Notes on or before the <br />relevant RCC termination date unless, subject to certain limitations, it has received pr«eeds from the sale of specified capital securities. The RCC will terminate upon <br />