MetLife 2005 Annual Report Download - page 34

Preferred Stock. On June 13, 2005, the Holding Company issued 24 million shares of Floating Rate Non-Cumulative Preferred Stock,
Series A (the ‘‘Series A preferred shares’’) with a $0.01 par value per share, and a liquidation preference of $25 per share for aggregate proceeds of
$600 million.
On June 16, 2005, the Holding Company issued 60 million shares of 6.50% Non-Cumulative Preferred Stock, Series B (the ‘‘Series B preferred
shares’’), with a $0.01 par value per share, and a liquidation preference of $25 per share, for aggregate proceeds of $1.5 billion.
The Series A and Series B preferred shares (the ‘‘Preferred Shares’’) rank senior to the common stock with respect to dividends and liquidation
rights. Dividends on the Preferred Shares are not cumulative. Holders of the Preferred Shares will be entitled to receive dividend payments only
when, as and if declared by the Holding Company’s board of directors or a duly authorized committee of the board. If dividends are declared on the
Series A preferred shares, they will be payable quarterly, in arrears, at an annual rate of the greater of (i) 1.00% above three-month LIBOR on the
related LIBOR determination date; or (ii) 4.00%. Any dividends declared on the Series B preferred shares will be payable quarterly, in arrears, at an
annual fixed rate of 6.50%. Accordingly, in the event that dividends are not declared on the Preferred Shares for payment on any dividend payment
date, then those dividends will cease to accrue and be payable. If a dividend is not declared before the dividend payment date, the Holding
Company has no obligation to pay dividends accrued for that dividend period whether or not dividends are declared and paid in future periods. No
dividends may, however, be paid or declared on the Holding Company’s common stock — or any other securities ranking junior to the Preferred
Shares — unless the full dividends for the latest completed dividend period on all Preferred Shares, and any parity stock, have been declared and
paid or provided for.
The Holding Company is prohibited from declaring dividends on the Preferred Shares if it fails to meet specified capital adequacy, net income
and shareholders’ equity levels. In addition, under Federal Reserve Board policy, the Holding Company may not be able to pay dividends if it does
not earn sufficient operating income.
The Preferred Shares do not have voting rights except in certain circumstances where the dividends have not been paid for an equivalent of six
or more dividend payment periods whether or not those periods are consecutive. Under such circumstances, the holders of the Preferred Shares
have certain voting rights with respect to members of the board of directors of the Holding Company.
The Preferred Shares are not subject to any mandatory redemption, sinking fund, retirement fund, purchase fund or similar provisions. The
Preferred Shares are redeemable, but not prior to September 15, 2010. On and after that date, subject to regulatory approval, the Preferred Shares
will be redeemable at the Holding Company’s option in whole or in part, at a redemption price of $25 per Preferred Share, plus declared and unpaid
dividends.
See ‘‘— Liquidity and Capital Resources — The Holding Company — Liquidity Uses — Dividends.’’
Common Equity Units. In connection with financing the acquisition of Travelers on July 1, 2005, 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. Each common equity unit has an initial
stated amount of $25 per unit and consists of (i) 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; (ii) 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; and (iii) 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.
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 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 trust preferred securities and through February 15, 2010 for the Series B trust preferred securities. The final
attempt at remarketing will not be subject to the reset cap. If all remarketing attempts are unsuccessful, the Holding Company has the right, as a
secured party, to apply the liquidation amount on the trust preferred securities to the common equity unit holders obligation under the stock
purchase contract and to deliver to the common equity unit holder a junior subordinated debt security payable on August 15, 2010 at an annual rate
of 4.82% and 4.91% on the Series A and Series B trust preferred securities, respectively, in payment of any accrued and unpaid distributions.
Each stock purchase contract requires (i) the Holding Company to pay the holder of the common equity unit quarterly contract payments on the
stock purchase contracts at the annual rate of 1.510% on the stated amount of $25 per stock purchase contract until the initial stock purchase date
and at the annual rate of 1.465% on the remaining stated amount of $12.50 per stock purchase contract thereafter; and (ii) the holder of the
common equity unit to purchase, and the Holding Company to sell, for $12.50, on each of the initial stock purchase date and the subsequent stock
purchase date, a number of newly issued or treasury shares of the Holding Company’s common stock, par value $0.01 per share, equal to the
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