MetLife 2008 Annual Report Download - page 53

further advantage of these funding sources in the future. In addition, the Company had obligations under funding agreements with the
FHLB of NY of $15.2 billion and $4.6 billion at December 31, 2008 and December 31, 2007 respectively for MLIC and with the FHLB
of Boston of $526 million and $726 million at December 31, 2008 and December 31, 2007 respectively for MICC. The FHLB of
Boston had also advanced $300 million to MICC at December 31, 2008, which is included in short-term debt. In the current market
environment, the Federal Home Loan Bank system has demonstrated its commitment to provide funding to its members especially
through these stressful market conditions. Management expects the renewal of these funding resources. See Note 7 of the Notes to
the Consolidated Financial Statements
As described below in “Debt Issuances and Other Borrowings” and above in “Extraordinary Market Conditions” the Company sold
various long-term debt securities in August 2008 and February 2009 in connection with the remarketing of the junior subordinated
debentures issued in connection with the common equity units. The Company also issued common stock in October 2008 as described in
“Extraordinary Market Conditions.”
At December 31, 2008 and 2007, the Company had outstanding $2.7 billion and $667 million in short-term debt, respectively, and
$9.7 billion and $9.1 billion in long-term debt, respectively. At December 31, 2008 and 2007, the Company had outstanding $5.2 billion
and $4.9 billion in collateral financing arrangements, respectively, and $3.8 billion and $4.1 billion in junior subordinated debt, respectively.
Long-term and short-term debt includes certain advances from the FHLB of NY.
Debt Issuances and Other Borrowings. In April 2008, MetLife Capital Trust X, a variable interest entity (“VIE”) consolidated by the
Company, issued exchangeable surplus trust securities (the “2008 Trust Securities”) with a face amount of $750 million. The 2008
Trust Securities will be exchanged into a like amount of the Holding Company’s junior subordinated debentures on April 8, 2038, the
scheduled redemption date, mandatory under certain circumstances, and at any time upon the Holding Company exercising its option to
redeem the securities. The 2008 Trust Securities will be exchanged for junior subordinated debentures prior to repayment. The final
maturity of the debentures is April 8, 2068. The Holding Company may cause the redemption of the 2008 Trust Securities or debentures
(i) in whole or in part, at any time on or after April 8, 2033 at their principal amount plus accrued and unpaid interest to the date of
redemption, or (ii) in certain circumstances, in whole or in part, prior to April 8, 2033 at their principal amount plus accrued and unpaid
interest to the date of redemption or, if greater, a make-whole price. Interest on the 2008 Trust Securities or debentures is payable semi-
annually at a fixed rate of 9.25% up to, but not including, April 8, 2038, the scheduled redemption date. In the event the 2008
Trust Securities or debentures are not redeemed on or before the scheduled redemption date, interest will accrue at an annual rate of
3-month LIBOR plus a margin equal to 5.540%, payable quarterly in arrears. The Holding Company has the right to, and in certain
circumstances the requirement to, defer interest payments on the 2008 Trust Securities or debentures for a period up to ten years. Interest
compounds during such periods of deferral. If interest is deferred for more than five consecutive years, the Holding Company may be
required to use proceeds from the sale of its common stock or warrants on common stock to satisfy its obligation. In connection with the
issuance of the 2008 Trust Securities, the Holding Company entered into a replacement capital covenant (“RCC”). As a part of the RCC,
the Holding Company agreed that it will not repay, redeem, or purchase the debentures on or before April 8, 2058, unless, subject to
certain limitations, it has received proceeds from the sale of specified capital securities. The RCC will terminate upon the occurrence of
certain events, including an acceleration of the debentures due to the occurrence of an event of default. The RCC is not intended for the
benefit of holders of the debentures and may not be enforced by them. The RCC is for the benefit of holders of one or more other
designated series of its indebtedness (which will initially be its 5.70% senior notes due June 15, 2035). The Holding Company also entered
into a replacement capital obligation which will commence in 2038 and under which the Holding Company must use reasonable
commercial efforts to raise replacement capital through the issuance of certain qualifying capital securities. Issuance costs associated
with the offering of the 2008 Trust Securities of $8 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 2008 Trust Securities until their scheduled redemption. Interest
expense on the 2008 Trust Securities was $51 million for the year ended December 31, 2008.
In December 2007, MetLife Capital Trust IV (“Trust IV”), a VIE consolidated by the Company, issued exchangeable surplus trust
securities (the “2007 Trust Securities”) with a face amount of $700 million and a discount of $6 million ($694 million). The 2007
Trust Securities will be exchanged into a like amount of Holding Company junior subordinated debentures on December 15, 2037, the
scheduled redemption date; mandatorily under certain circumstances; and at any time upon the Holding Company exercising its option to
redeem the securities. The 2007 Trust Securities will be exchanged for junior subordinated debentures prior to repayment. The final
maturity of the debentures is December 15, 2067. The Holding Company may cause the redemption of the 2007 Trust Securities or
debentures (i) in whole or in part, at any time on or after December 15, 2032 at their principal amount plus accrued and unpaid interest to
the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to December 15, 2032 at their principal amount plus
accrued and unpaid interest to the date of redemption or, if greater, a make-whole price. Interest on the 2007 Trust Securities or
debentures is payable semi-annually at a fixed rate of 7.875% up to, but not including, December 15, 2037, the scheduled redemption
date. In the event the 2007 Trust Securities or debentures are not redeemed on or before the scheduled redemption date, interest will
accrue at an annual rate of 3-month LIBOR plus a margin equal to 3.96%, payable quarterly in arrears. The Holding Company has the right
to, and in certain circumstances the requirement to, defer interest payments on the 2007 Trust Securities or debentures for a period up to
ten years. Interest compounds during such periods of deferral. If interest is deferred for more than five consecutive years, the Holding
Company may be required to use proceeds from the sale of its common stock or warrants on common stock to satisfy its obligation. In
connection with the issuance of the 2007 Trust Securities, the Holding Company entered into a RCC. As a part of the RCC, the Holding
Company agreed that it will not repay, redeem, or purchase the debentures on or before December 15, 2057, unless, subject to certain
limitations, it has received proceeds from the sale of specified capital securities. The RCC will terminate upon the occurrence of certain
events, including an acceleration of the debentures due to the occurrence of an event of default. The RCC is not intended for the benefit of
holders of the debentures and may not be enforced by them. The RCC is for the benefit of holders of one or more other designated series
of its indebtedness (which will initially be its 5.70% senior notes due June 15, 2035). The Holding Company also entered into a
replacement capital obligation which will commence in 2037 and under which the Holding Company must use reasonable commercial
efforts to raise replacement capital through the issuance of certain qualifying capital securities. Issuance costs associated with the offering
of the 2007 Trust Securities of $10 million have been capitalized, are included in other assets, and are amortized using the effective interest
50 MetLife, Inc.