Anthem Blue Cross 2002 Annual Report Download - page 72

NOTES
to Consolidated Financial Statements (Continued)
Anthem, Inc. 2002 Annual Report 67
5. Long Term Debt and Commitments
At December 31 debt consists of the following:
2002 2001
Surplus notes at 9.125% due 2010 $ 296.3 $295.9
Surplus notes at 9.000% due 2027 197.3 197.3
Senior guaranteed notes at
6.750% due 2003 99.9 99.7
Debentures included in Equity
Security Units at 5.950% due 2006 222.2 220.2
Senior unsecured notes at
6.800% due 2012 789.8 —
Senior unsecured notes at
4.875% due 2005 149.1 —
Other 5.0 5.2
Long-term debt 1,759.6 818.3
Current portion of long-term debt (100.2) (0.3)
Long-term debt, less current portion $1,659.4 $818.0
Surplus notes are unsecured obligations of Anthem
Insurance and are subordinate in right of payment to all
of Anthem Insurance’s existing and future indebtedness.
Any payment of interest or principal on the surplus notes
may be made only with the prior approval of the Indiana
Department of Insurance (“DOI”), and only out of capital
and surplus funds of Anthem Insurance that the DOI
determines to be available for the payment under Indiana
insurance laws.
Senior guaranteed notes are unsecured and unsubordi-
nated obligations of Anthem Insurance and will rank
equally in right of payment with all other existing and future
senior indebtedness of Anthem Insurance. Senior guaran-
teed notes of $99.9, which mature in July 2003, are reported
with other current liabilities as of December 31, 2002.
Debentures included in Equity Security Units are
obligations of Anthem and are unsecured and subordi-
nated in right of payment to all of Anthem’s existing and
future senior indebtedness. Each Equity Security Unit
contains a purchase contract under which the holder
agrees to purchase, for fifty dollars, shares of Anthem
common stock on November 15, 2004, and a 5.95% sub-
ordinated debenture. In addition, Anthem will pay quar-
terly contract fee payments on the purchase contracts at
the annual rate of 0.05% of the stated amount of fifty
dollars per purchase contract, subject to Anthem’s rights
to defer these payments.
On July 31, 2002, Anthem issued $950.0 of long-
term senior unsecured notes ($150.0 of 4.875% notes due
2005, and $800.0 of 6.800% notes due 2012). The net
proceeds of $938.5 from the note offerings were used to
pay a portion of the $1,134.5 of cash consideration and
expenses associated with Anthem’s acquisition of Trigon.
On July 2, 2002, Anthem amended and restated its
revolving lines of credit with its lender group to make
Anthem the borrower and to increase the available bor-
rowings to $1,000.0. Under one facility, which expires
November 5, 2006, Anthem may borrow up to $400.0.
Under the other facility, which expires July 1, 2003,
Anthem may borrow up to $600.0. Any amounts out-
standing under this facility at July 1, 2003 (except
amounts which bear interest rates determined by a com-
petitive bidding process) convert to a one-year term loan
at Anthem’s option. The Company can select from three
options for borrowing under both credit facilities. The
first option is a floating rate equal to the greater of the
prime rate or the federal funds rate plus one-half percent.
The second option is a floating rate equal to LIBOR plus
a margin determined by reference to the ratings of
Anthem’s senior, unsecured debt. The third option, is a
competitive bid process, under which borrowings may
bear interest at floating rates determined by reference to
LIBOR, or at fixed rates. Anthem’s ability to borrow
under these credit facilities is subject to compliance with
certain covenants. Anthem Insurance’s two previous
revolving credit facilities totaling $800.0 were terminated
on July 2, 2002, as well as the two credit agreements
entered into in February 2002, allowing for $135.0 of
additional borrowings. No amounts were outstanding
under the current or prior facilities as of December 31,
2002 or 2001. In addition to the revolving credit facili-
ties, at December 31, 2001, Anthem Insurance had a
$300.0 commercial paper program, which was discontin-
ued as of July 2, 2002.
On December 18, 2002, Anthem filed a shelf regis-
tration with the Securities and Exchange Commission to
register any combination of debt or equity securities in
one or more offerings up to an aggregate amount of
$1,000.0. Specific information regarding terms of the
offering and the securities being offered will be provided
at the time of the offering. Proceeds from any offering will