MetLife 2005 Annual Report Download - page 103

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
with another institutional lender. The following table provides details on the capacity and outstanding balances of such committed facilities as of
December 31, 2005:
Letter of
Credit Unused
Account Party Expiration Capacity Issuances Commitments
(In millions)
The Travelers Life and Annuity Reinsurance Company ********************** July 2010 $2,000 $1,930 $ 70
Exeter Reassurance Company Ltd. ************************************* March 2015 225 225 —
Exeter Reassurance Company Ltd. ************************************* June 2015 250 250 —
Exeter Reassurance Company Ltd. ************************************* September 2015 325 — 325
Exeter Reassurance Company Ltd. and MetLife, Inc. *********************** December 2015 500 280 220
Total**************************************************************** $3,300 $2,685 $615
Note: The Holding Company is a guarantor under the first four agreements and a party to the fifth agreement above.
At December 31, 2005 and 2004, the Company had outstanding $3.6 billion and $961 million, respectively, in letters of credit from various banks,
of which $3.4 billion and $470 million, respectively, were part of committed facilities. The letters of credit outstanding at December 31, 2005 and 2004 all
automatically renew for one year periods except for $755 million in the current period which expires in ten years. Since commitments associated with
letters of credit and financing arrangements may expire unused, these amounts do not necessarily reflect the Company’s actual future cash funding
requirements.
Other
Interest expense related to the Company’s indebtedness included in other expenses was $544 million, $428 million and $420 million for the years
ended December 31, 2005, 2004 and 2003, respectively.
See also Note 9 for a description of junior subordinated debentures of $2,134 million issued in connection with the common equity units.
9. Common Equity Units
Summary
In connection with financing the acquisition of Travelers on July 1, 2005, which is more fully described in Note 2, the Company distributed and sold
82.8 million 6.375% common equity units for $2,070 million in proceeds in a registered public offering on June 21, 2005. As described below, the
common equity units consist of interests in trust preferred securities issued by MetLife Capital Trusts II and III, and stock purchase contracts issued by the
Holding Company. The only assets of MetLife Capital Trusts II and III are junior subordinated debentures issued by the Holding Company.
Common Equity Units
Each common equity unit has an initial stated amount of $25 per unit and consists of:
)A 1/80 or 1.25% ($12.50), undivided beneficial ownership interest in a series A trust preferred security of MetLife Capital Trust II (‘‘Series A Trust’’),
with an initial liquidation amount of $1,000.
)A 1/80 or 1.25% ($12.50), undivided beneficial ownership interest in a series B trust preferred security of MetLife Capital Trust III (‘‘Series B Trust’’
and, together with the Series A Trust, the ‘‘Trusts’’), with an initial liquidation amount of $1,000.
)A stock purchase contract under which the holder of the common equity unit will purchase and the Holding Company will sell, on each of the initial
stock purchase date and the subsequent stock purchase date, a variable number of shares of the Holding Company’s common stock, par value
$0.01 per share, for a purchase price of $12.50.
Junior Subordinated Debentures Issued to Support Trust Common and Preferred Securities
The Holding Company issued $1,067 million 4.82% Series A and $1,067 million 4.91% Series B junior subordinated debt securities due no later
than February 15, 2039 and February 15, 2040, respectively, for a total of $2,134 million, in exchange for $2,070 million in aggregate proceeds from the
sale of the trust preferred securities by the Trusts and $64 million in trust common securities issued equally by the Trusts. The common and preferred
securities of the Trusts, totaling $2,134 million, represent undivided beneficial ownership interests in the assets of the Trusts, have no stated maturity and
must be redeemed upon maturity of the corresponding series of junior subordinated debt securities — the sole assets of the respective Trusts. The
Series A and Series B Trusts will make quarterly distributions on the common and preferred securities at an annual rate of 4.82% and 4.91%, respectively.
The trust common securities, which are held by the Holding Company, represent a 3% interest in the Trusts and are reflected as fixed maturities in
the accompanying consolidated balance sheet of MetLife, Inc. The Trusts are VIEs in accordance with FIN 46 and FIN 46(r), and the Company does not
consolidate its interest in MetLife Capital Trusts II and III as it is not the primary beneficiary of either of the Trusts.
The Holding Company has directly guaranteed the repayment of the trust preferred securities to the holders thereof to the extent that there are funds
available in the Trusts. The guarantee will remain in place until the full redemption of the trust preferred securities. The trust preferred securities held by the
common equity unit holders are pledged to the Holding Company to collateralize the obligation of the common equity unit holders under the related stock
purchase contracts. The common equity unit holder may substitute certain zero coupon treasury securities in place of the trust preferred securities as
collateral under the stock purchase contract.
The trust preferred securities have remarketing dates which correspond with the initial and subsequent stock purchase dates to provide the holders
of the common equity units with the proceeds to exercise the stock purchase contracts. The initial stock purchase date is expected to be August 15,
2008, but could be deferred for quarterly periods until February 15, 2009, and the subsequent stock purchase date is expected to be February 15,
2009, but could be deferred for quarterly periods until February 15, 2010. At the remarketing date, the remarketing agent will have the ability to reset the
interest rate on the trust preferred securities to generate sufficient remarketing proceeds to satisfy the common equity unit holder’s obligation under the
stock purchase contract, subject to a reset cap for each of the first two attempted remarketings of each series. The interest rate on the supporting junior
subordinated debt securities issued by the Holding Company will be reset at a commensurate rate. If the initial remarketing is unsuccessful, the
remarketing agent will attempt to remarket the trust preferred securities, as necessary, in subsequent quarters through February 15, 2009 for the Series A
MetLife, Inc. F-41