Sun Life 2010 Annual Report Download - page 113

11. Senior debentures
The following obligations are included in Senior debentures as at December 31:
Currency of
Borrowing
Interest
Rate
Earliest Par
Call Date Maturity 2010 2009
Sun Life Assurance debentures(1)
Issued to Sun Life Capital Trust (“SLCT I”)
Series A issued October 19, 2001 Cdn. dollars 6.87% December 31, 2011(2) 2031 $ 960 $ 960
Series B issued June 25, 2002 Cdn. dollars 7.09% June 30, 2032(2) 2052 200 200
Issued to Sun Life Capital Trust II
(“SLCT II”)
Series C issued November 20, 2009(3) Cdn. dollars 6.06% December 31, 2019(4) 2108 500 500
SLF Inc. senior unsecured debentures
Series A issued November 23, 2005(5) Cdn. dollars 4.80% November 23, 2015(6) 2035 600 600
Series B issued March 13, 2006(7) Cdn. dollars 4.95% June 1, 2016(6) 2036 700 700
Series B issued February 26, 2007(7) Cdn. dollars 4.95% June 1, 2016(6) 2036 251 251
Series C issued July 11, 2006(8) Cdn. dollars 5.00% July 11, 2011(6) 2031 300 300
Series D issued June 30, 2009 Cdn. dollars 5.70% n/a(9) 2019 300 300
$ 3,811 $ 3,811
Fair value $ 4,021 $ 3,987
(1) The Sun Life Assurance debentures were issued to SLCT I and SLCT II, which are VIEs that are not consolidated by us. SLCT I and SLCT II issued innovative capital
securities and used the proceeds from the issuances to purchase the Sun Life Assurance debentures. The Sun Life Assurance debentures qualify as regulatory capital, and
are further described in this Note.
(2) This debenture may be redeemed, at the option of the issuer. Prior to the date noted, the redemption price is the greater of par and a price based on the yield of a
corresponding Government of Canada bond; from the date noted, the redemption price is par. This debenture may also be redeemed at par at any time upon the occurrence of
a Regulatory Event or Tax Event, as described in the debenture. Redemption of this debenture is subject to regulatory approval.
(3) On December 31, 2019, and every fifth anniversary thereafter (“Interest Reset Date”), the interest rate will reset to an annual rate equal to the five-year Government of Canada
bond yield plus 3.60%.
(4) This debenture may be redeemed on or after December 31, 2014, at the option of the issuer. Prior to the date noted or on any date that is not an Interest Reset Date, the
redemption price is the greater of par and a price based on the yield of a corresponding Government of Canada bond; the redemption price is par if redemption occurs on an
Interest Reset Date. This debenture may also be redeemed at par at any time upon the occurrence of a Regulatory Event or Tax Event, as described in the debenture.
Redemption of this debenture is subject to regulatory approval.
(5) From November 23, 2015, interest is payable at 1% over the 90-day Bankers’ Acceptance Rate.
(6) The relevant debenture may be redeemed, at par, on an interest payment date on or after the date noted, at the option of the issuer.
(7) From June 1, 2016, interest is payable at 1% over the 90-day Bankers’ Acceptance Rate.
(8) From July 11, 2011, interest is payable at 1% over the 90-day Bankers’ Acceptance Rate.
(9) The relevant debenture may be redeemed, at the option of the issuer. The redemption price is the greater of par and a price based on the yield of a corresponding Government
of Canada bond.
Fair value is based on market price for the same or similar instruments as appropriate. Interest expense for senior debentures was
$218, $182 and $170 for 2010, 2009 and 2008, respectively.
All senior unsecured debentures of SLF Inc. are direct senior unsecured obligations of SLF Inc. and rank equally with all other
unsecured and unsubordinated indebtedness of SLF Inc.
Trust Capital Securities
Innovative capital instruments, Sun Life ExchangEable Capital Securities (“SLEECS”), have been issued through SLCT I and SLCT II
(the “SL Capital Trusts”), special purpose entities established as trusts under the laws of Ontario.
SLCT I issued Sun Life ExchangEable Securities – Series A (“SLEECS A”) and Sun Life ExchangEable Securities – Series B
(“SLEECS B”), which are classes of units that represent an undivided beneficial ownership interest in the assets of that trust. SLEECS
A and SLEECS B are non-voting except in certain limited circumstances. Holders of SLEECS A and SLEECS B are eligible to receive
semi-annual non-cumulative fixed cash distributions. SLCT II issued Sun Life ExchangEable Capital Securities – Series 2009-1
(“SLEECS 2009-1”), which are subordinated unsecured debt obligations. Holders of SLEECS 2009-1 are eligible to receive semi-
annual interest payments. The proceeds of the issuances of SLEECS A, SLEECS B and SLEECS 2009-1 were used by the SL Capital
Trusts to purchase senior debentures of Sun Life Assurance.
The SLEECS are structured with the intention of achieving Tier 1 regulatory capital treatment for SLF Inc. and Sun Life Assurance and,
as such, have features of equity capital. No interest payments or distributions will be paid in cash by the SL Capital Trusts on the
SLEECS if Sun Life Assurance fails to declare regular dividends (i) on its Class B Non-Cumulative Preferred Shares Series A, or (ii) on
its public preferred shares, if any are outstanding (“Missed Dividend Event”). In the case of the SLEECS 2009-1, if a Missed Dividend
Event occurs or if an interest payment is not made in cash on the SLEECS 2009-1 for any reason, including at the election of Sun Life
Assurance, holders of the SLEECS 2009-1 will be required to invest interest paid on the SLEECS 2009-1 in non-cumulative perpetual
preferred shares of Sun Life Assurance. In the case of the SLEECS A and SLEECS B, if a Missed Dividend Event occurs, the net
distributable funds of SLCT I will be distributed to Sun Life Assurance as the holder of Special Trust Securities of that trust. If the
SL Capital Trusts fail to pay in cash the semi-annual interest payments or distributions on the SLEECS in full for any reason other than
a Missed Dividend Event, then, for a specified period of time, Sun Life Assurance will not declare dividends of any kind on any of its
public preferred shares, and if no such public preferred shares are outstanding, SLF Inc. will not declare dividends of any kind on any
of its preferred shares or common shares.
Notes to the Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2010 109