MetLife 2008 Annual Report Download - page 191

and III held by the Holding Company and the remaining $2,070 million of junior subordinated debentures were distributed to the holders of
the trust preferred securities and such trust preferred securities were cancelled.
The Holding Company directly guaranteed the repayment of the trust preferred securities to the holders thereof to the extent that there
were funds available in the Capital Trusts. The guarantee remained in place until the full redemption of the trust preferred securities. The
trust preferred securities held by the common equity unit holders were 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 holders were permitted to substitute
certain zero coupon treasury securities in place of the trust preferred securities, or the junior subordinated debentures subsequent to the
dissolution of the Capital Trusts, as collateral under the stock purchase contract.
The trust preferred securities, or the junior subordinated debentures subsequent to the dissolution of the Capital Trusts, had
remarketing dates which corresponded with the initial and subsequent stock purchase dates to provide the holders of the common
equity units with proceeds to settle the stock purchase contracts. The initial stock purchase date was August 15, 2008, but could have
been deferred for quarterly periods until February 15, 2009 and the subsequent stock purchase date was February 15, 2009 but could
have been deferred for quarterly periods until February 15, 2010. At the respective remarketing dates, the remarketing agent had the ability
to reset the interest rate on the remarketed 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
, which reset cap was waived by the Holding Company in connection with the remarketing of the Series B debentures in February 2009.
The interest rate on the supporting junior subordinated debentures issued by the Holding Company would have been reset at a
commensurate rate. If the initial remarketing had been unsuccessful, the remarketing agent would have attempted to remarket the trust
preferred securities or junior subordinated debentures, as necessary, in subsequent quarters through February 15, 2009 for the Series A
trust preferred securities or junior subordinated debentures and through February 15, 2010 for the Series B trust preferred securities or
junior subordinated debentures. The final attempt at remarketing would not have been subject to the reset cap. If all remarketing attempts
were unsuccessful, the Holding Company had 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 or junior subordinated debentures, respectively, in payment of any accrued and unpaid distributions.
Stock Purchase Contracts
Each stock purchase contract required 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 applicable settlement rate. The settlement rate at the
respective stock purchase date was calculated based on the closing price of the common stock during a specified 20-day period
immediately preceding the applicable stock purchase date. If the market value of the Holding Company’s common stock was less than the
threshold appreciation price of $53.10 but greater than $43.35, the reference price, the settlement rate, as adjusted for dividends in
accordance with the terms of the stock purchase contracts, was an amount of the Holding Company’s common stock equal to the stated
amount of $12.50 divided by the market value. If the market value was less than or equal to the reference price, the settlement rate, as
adjusted for dividends in accordance with the terms of the stock purchase contracts, was 0.28835 shares of the Holding Company’s
common stock. If the market value was greater than or equal to the threshold appreciation price, the settlement rate, as adjusted for
dividends in accordance with the terms of the stock purchase contracts, was 0.23540 shares of the Holding Company’s common stock.
Accordingly, upon settlement in the aggregate, the Holding Company received proceeds of $2,070 million and issued between 39.0 million
and 47.8 million shares of its common stock. The stock purchase contract could have been exercised at the option of the holder at any
time prior to the settlement date. However, upon early settlement, the holder would have received the minimum settlement rate. The
Holding Company delivered 44,587,703 shares of its common stock in settlement of the stock purchase contracts.
The stock purchase contracts further required 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.
The quarterly distributions on the Series A and Series B trust preferred securities of 4.82% and 4.91%, respectively, combined with the
contract payments on the stock purchase contract of 1.510%, (1.465% after the initial stock purchase date) resulted in the 6.375% yield on
thecommonequityunits.
If the Holding Company had exercised its right to defer any of the contract payments on the stock purchase contract, then it would have
accrued additional amounts on the deferred amounts at the annual rate of 6.375% until paid, to the extent permitted by law.
The value of the stock purchase contracts at issuance, $96.6 million, was calculated as the present value of the future contract
payments due under the stock purchase contract of 1.510% through the initial stock purchase date, and 1.465% up to the subsequent
stock purchase date, discounted at the interest rate on the supporting junior subordinated debentures issued by the Holding Company,
4.82% or 4.91% on the Series A and Series B trust preferred securities, respectively. The value of the stock purchase contracts was
recorded in other liabilities with an offsetting decrease in additional paid-in capital. The other liability balance related to the stock purchase
contracts accrued interest at the discount rate of 4.82% or 4.91%, as applicable, with an offsetting increase to interest expense. As the
contract payments were made under the stock purchase contracts they reduced the other liability balance. During the years ended
December 31, 2008, 2007 and 2006, the Holding Company increased the other liability balance for the accretion of the discount on the
contract payment of $2 million, $2 million and $3 million, respectively and made contract payments of $26 million, $31 million and
$31 million, respectively.
F-68 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)