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
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