MetLife 2010 Annual Report Download - page 198

In connection with the collateral financing arrangement, the Holding Company entered into an agreement with the same unaffiliated
financial institution under which the Holding Company is entitled to the return on the investment portfolio held by the trusts established in
connection with this collateral financing arrangement in exchange for the payment of a stated rate of return to the unaffiliated financial
institution of 3-month LIBOR plus 0.70%, payable quarterly. The collateral financing agreement may be extended by agreement of the Holding
Company and the unaffiliated financial institution on each anniversary of the closing. The Holding Company may also be required to make
payments to the unaffiliated financial institution, for deposit into the trusts, related to any decline in the estimated fair value of the assets held
by the trusts, as well as amounts outstanding upon maturity or early termination of the collateral financing arrangement. During 2010, no
payments were made or received by the Holding Company. During 2009 and 2008, the Holding Company contributed $360 million and
$320 million, respectively, as a result of declines in the estimated fair value of the assets in the trusts. Cumulatively, since May 2007, the
Holding Company has contributed a total of $680 million as a result of declines in the estimated fair value of the assets in the trusts, all of which
was deposited into the trusts.
In addition, the Holding Company may be required to pledge collateral to the unaffiliated financial institution under this agreement. At
December 31, 2010 and 2009, the Holding Company had pledged $63 million and $80 million, respectively, under the agreement.
Transaction costs associated with the collateral financing arrangement of $5 million have been capitalized, are included in other assets,
and are being amortized over the period from May 2007, the date the Holding Company entered into the collateral financing arrangement, to
its expiration. Total interest expense related to the collateral financing arrangement was $30 million, $44 million and $107 million for the years
ended December 31, 2010, 2009 and 2008, respectively.
13. Junior Subordinated Debt Securities
Outstanding Junior Subordinated Debt Securities
Outstanding junior subordinated debt securities and trust securities which MetLife, Inc. will exchange for junior subordinated debt
securities prior to redemption or repayment were as follows:
Issuer Issue Date Face Value Interest Rate(2) Scheduled Redemption Date
Interest Rate
Subsequent to
Scheduled
Redemption
Date(3) Final Maturity 2010 2009
Carrying Value
at December 31,
(In millions) (In millions)
MetLife,Inc. ............. July2009 $ 500 10.750%August2039 LIBOR + 7.548% August 2069 $ 500 $ 500
MetLifeCapitalTrustX(1)...... April2008 $ 750 9.250% April 2038 LIBOR + 5.540% April 2068 750 750
MetLife Capital Trust IV(1) . . . . . December 2007 $ 700 7.875% December 2037 LIBOR + 3.960% December 2067 694 694
MetLife,Inc. ............. December 2006 $1,250 6.400% December 2036 LIBOR + 2.205% December 2066 1,247 1,247
$3,191 $3,191
(1) MetLife Capital Trust X and MetLife Capital Trust IV are VIEs which are consolidated in the financial statements of the Company. The
securities issued by these entities are exchangeable surplus trust securities, which will be exchanged for a like amount of the Holding
Company’s junior subordinated debt securities on the scheduled redemption date; mandatorily under certain circumstances, and at any
time upon the Holding Company exercising its option to redeem the securities. The exchangeable surplus trust securities are classified as
junior subordinated debt securities for purposes of financial statement presentation.
(2) Prior to the scheduled redemption date, interest is payable semiannually in arrears.
(3) In the event the securities are not redeemed on or before the scheduled redemption date, interest will accrue after such date at an annual
rate of 3-month LIBOR plus a margin, payable quarterly in arrears.
In connection with each of the securities described above, the Holding Company may redeem or may cause the redemption of the
securities (i) in whole or in part, at any time on or after the date five years prior to the scheduled redemption date at their principal amount plus
accrued and unpaid interest to, but excluding, the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to the date five
years prior to the scheduled redemption date at their principal amount plus accrued and unpaid interest to, but excluding, the date of
redemption or, if greater, a make-whole price. The Holding Company also has the right to, and in certain circumstances the requirement to,
defer interest payments on the securities 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 is required to use proceeds from the sale of its common stock or
warrants on common stock to satisfy interest payment obligation. In connection with each of the securities described above, the Holding
Company entered into a replacement capital covenant (“RCC”). As part of the RCC, the Holding Company agreed that it will not repay,
redeem, or purchase the securities on or before a date ten years prior to the final maturity date of each issuance, unless, subject to certain
limitations, it has received proceeds during a specified period from the sale of specified replacement securities. The RCC will terminate upon
the occurrence of certain events, including an acceleration of the securities due to the occurrence of an event of default. The RCC is not
intended for the benefit of holders of the securities and may not be enforced by them. The RCC is for the benefit of holders of one or more
other designated series of the Holding Company’s indebtedness (which will initially be its 5.70% senior notes due June 2035). The Holding
Company also entered into a replacement capital obligation which will commence during the six month period prior to the scheduled
redemption date and under which the Holding Company must use reasonable commercial efforts to raise replacement capital to permit
repayment of the securities through the issuance of certain qualifying capital securities.
Issuance costs associated with the issuance of the securities of $5 million and $8 million were incurred during the years ended
December 31, 2009 and 2008, respectively. These issuance costs have been capitalized, are included in other assets, and are amortized
over the period from the issuance date until the scheduled redemption date of the respective issuances. Interest expense on outstanding
F-109MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)