MetLife 2010 Annual Report Download - page 199

junior subordinated debt securities was $258 million, $231 million and $186 million for the years ended December 31, 2010, 2009 and 2008,
respectively.
Junior Subordinated Debt Securities Underlying Common Equity Units
In June 2005, 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 2039 and February 2040, respectively, for a total of $2,134 million, in exchange for $64 million in trust
common securities of MetLife Capital Trust II (“Series A Trust”) and MetLife Capital Trust III (“Series B Trust”) and, together with the Series A
Trust, (the “Capital Trusts”), both subsidiary trusts of MetLife, Inc., and $2,070 million in aggregate cash proceeds from the sale by the
subsidiary trusts of trust preferred securities, constituting part of the common equity units. The subsidiary trusts each issued $1,035 million of
trust preferred securities and $32 million of trust common securities.
In August 2008, the Series A Trust was dissolved and $32 million of the Series A junior subordinated debt securities were returned to the
Holding Company concurrently with the cancellation of the $32 million of trust common securities of the Series A Trust held by MetLife, Inc.
Upon dissolution of the Series A Trust, the remaining $1,035 million of Series A junior subordinated debt securities were distributed to the
holders of the trust preferred securities and such trust preferred securities were cancelled. In connection with the remarketing transaction in
August 2008, the remaining $1,035 million of MetLife, Inc. Series A junior subordinated debt securities were modified, as permitted by their
terms, to be 6.817% senior debt securities, Series A, due August 2018. The Company did not receive any proceeds from the remarketing.
See also Notes 11, 14 and 18.
In February 2009, the Series B Trust was dissolved and $32 million of the Series B junior subordinated debt securities were returned to the
Holding Company concurrently with the cancellation of the $32 million of trust common securities of the Series B Trust held by MetLife, Inc.
Upon dissolution of the Series B Trust, the remaining $1,035 million of Series B junior subordinated debt securities were distributed to the
holders of the trust preferred securities and such trust preferred securities were cancelled. In connection with the remarketing transaction in
February 2009, the remaining $1,035 million of MetLife, Inc. Series B junior subordinated debt securities were modified, as permitted by their
terms, to be 7.717% senior debt securities, Series B, due February 2019. The Company did not receive any proceeds from the remarketing.
See also Notes 11, 14 and 18.
Interest expense on the junior subordinated debt securities underlying the common equity units was $6 million and $84 million for the years
ended December 31, 2009 and 2008, respectively. There was no interest expense on the junior subordinated debt securities underlying the
common equity units for the year ended December 31, 2010.
14. Common Equity Units
Acquisition of ALICO
In connection with the financing of the Acquisition (see Note 2) in November 2010, MetLife, Inc. issued to ALICO Holdings 40.0 million
Equity Units with an aggregate stated amount at issuance of $3,000 million and an estimated fair value of $3,189 million. Each Equity Unit has
an initial stated amount of $75 per unit and initially consists of: (i) three Purchase Contracts, each of which obligates the holder to purchase,
on a subsequent settlement date, a variable number of shares of MetLife, Inc. common stock, par value $0.01 per share, for a purchase price
of $25 ($75 in the aggregate); and (ii) a 1⁄40 undivided beneficial ownership interest in each of three series of Debt Securities issued by MetLife,
Inc., each series of Debt Securities having an aggregate principal amount of $1,000 million. Distributions on the Equity Units will be made
quarterly, and will consist of contract payments on the Purchase Contracts and interest payments on the Debt Securities, at an aggregate
annual rate of 5.00% of the stated amount at any time. The excess of the estimated fair value of the Equity Units over the estimated fair value of
the Debt Securities (see Note 11), after accounting for the present value of future contract payments recorded in other liabilities, results in a
net decrease to additional paid-in capital of $69 million, representing the fair value of the Purchase Contracts discussed below.
The Equity Units, the Debt Securities and the common stock issuable upon settlement of the Purchase Contracts are subject to the terms
of an investor rights agreement entered into among MetLife, Inc., AIG and ALICO Holdings, which grants to ALICO Holdings certain rights and
sets forth certain agreements with respect to ALICO Holdings’ ownership, voting and transfer of the shares, including minimum holding
periods, restrictions on the number of shares ALICO Holdings can sell at one time, its agreement to vote the common stock in the same
proportion as the common stock voted by all other holders and its agreement not to seek control or influence the Company’s management or
Board of Directors. The Equity Units are not listed on any exchange or inter-dealer quotation system. The Equity Units have been pledged to
secure certain indemnification obligations of ALICO Holdings under the Stock Purchase Agreement. See Note 2.
Purchase Contracts
Settlement of the Purchase Contracts of each series will occur upon the successful remarketing of the related series of Debt Securities, or
upon a final failed remarketing of the related series, as described below under “— Debt Securities.” On each settlement date subsequent to a
successful remarketing, the holder will pay $25 per Equity Unit and MetLife, Inc. will issue to such holder a variable number of shares of its
common stock in settlement of the applicable Purchase Contract. The number of shares to be issued will depend on the average of the daily
volume-weighted average prices of MetLife, Inc.’s common stock during the 20 trading day periods ending on, and including, the third day
prior to the initial scheduled settlement date for each series of Purchase Contracts. The initially-scheduled settlement dates are October 10,
2012 for the Series C Purchase Contracts, September 11, 2013 for the Series D Purchase Contracts and October 8, 2014 for the Series E
Purchase Contracts. If the average value of MetLife, Inc.’s common stock as calculated pursuant to the Stock Purchase Agreement during the
applicable 20 trading day period is less than or equal to $35.42, as such amount may be adjusted (the “Reference Price”), the number of
shares to be issued in settlement of the Purchase Contract will equal $25 divided by the Reference Price, as calculated pursuant to the Stock
Purchase Agreement (the “Maximum Settlement Rate”). If the market value of MetLife, Inc.’s common stock is greater than or equal to
$44.275, as such amount may be adjusted (the “Threshold Appreciation Price”), the number of shares to be issued in settlement of the
Purchase Contract will equal $25 divided by the Threshold Appreciation Price, as so calculated (the “Minimum Settlement Rate”). If the market
value of MetLife, Inc.’s common stock is greater than the Reference Price and less than the Threshold Appreciation Price, the number of
shares to be issued will equal $25 divided by the applicable market value, as so calculated. In the event of an unsuccessful remarketing of any
F-110 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)