MetLife 2007 Annual Report Download - page 146

amortized using the effective interest method over the period from the issuance date of the Trust Securities until their scheduled
redemption. Interest expense on the Trust Securities was $3 million for the year ended December 31, 2007.
Junior Subordinated Debentures Issued by RGA
In December 2005, RGA issued junior subordinated debentures with a face amount of $400 million. Interest is payable semi-annually at
a fixed rate of 6.75% up to but not including the scheduled redemption date, December 15, 2015. The debentures may be redeemed (i) in
whole or in part, at any time on or after December 15, 2015 at their principal amount plus accrued and unpaid interest to the date of
redemption, or (ii) in whole or in part, prior to December 15, 2015 at their principal amount plus accrued and unpaid interest to the date of
redemption or, if greater, a make-whole price. In the event the debentures are not redeemed on or before the scheduled redemption date of
December 15, 2015, interest on these debentures will accrue at an annual rate of 3-month LIBOR plus a margin equal to 2.665%, payable
quarterly in arrears. The final maturity of the debentures is December 15, 2065. RGA has the right to, and in certain circumstances the
requirement to, defer interest payments on the debentures for a period up to ten years. Upon an optional or mandatory deferral of interest
payments, RGA is generally not permitted to pay common stock dividends or make payments of interest or principal on securities which
rank equal or junior to the subordinated debentures, until the accrued and unpaid interest on the subordinated debentures is paid. Interest
compounds during periods of deferral. Issuance costs associated with the offering of the debentures of $6 million have been capitalized,
are included in other assets, and are amortized using the effective interest method over the period from the issuance date of the
debentures until their scheduled redemption. Interest expense on the debentures was $27 million, $27 million and $2 million for the years
ended December 31, 2007, 2006 and 2005, respectively.
13. Common Equity Units
In connection with financing the acquisition of Travelers on July 1, 2005, which is described in Note 2, the Holding 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: (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 “Capital Trusts”), with an initial liquidation amount of $1,000; (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.
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 Capital Trusts and $64 million in trust common securities issued
equally by the Capital Trusts. The common and preferred securities of the Capital Trusts, totaling $2,134 million, represent undivided
beneficial ownership interests in the assets of the Capital 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 Capital Trusts. The Series A Trust and
Series B Trust will each 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
maturity securities in the consolidated balance sheet of MetLife, Inc. The Capital Trusts are VIEs in accordance with 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 Capital 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 Capital 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
F-50 MetLife, Inc.
MetLife, Inc.
Notes to Consolidated Financial Statements — (Continued)