The Hartford 2007 Annual Report Download - page 244

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-67
14. Debt (continued)
Contingent Capital Facility
On February 12, 2007, The Hartford entered into a put option agreement (the “Put Option Agreement”) with Glen Meadow ABC Trust,
a Delaware statutory trust (the “ABC Trust”), and LaSalle Bank National Association, as put option calculation agent. The Put Option
Agreement provides The Hartford with the right to require the ABC Trust, at any time and from time to time, to purchase The
Hartford’ s junior subordinated notes (the “Notes”) in a maximum aggregate principal amount not to exceed $500. Under the Put
Option Agreement, The Hartford will pay the ABC Trust premiums on a periodic basis, calculated with respect to the aggregate
principal amount of Notes that The Hartford had the right to put to the ABC Trust for such period. The Hartford has agreed to
reimburse the ABC Trust for certain fees and ordinary expenses. The Company holds a variable interest in the ABC Trust where the
Company is not the primary beneficiary. As a result, the Company did not consolidate the Trust, as they did not meet the consolidation
requirements under FIN 46(R).
Commercial Paper, Revolving Credit Facility and Line of Credit
The table below details the Company’ s short-term debt programs and the applicable balances outstanding.
Maximum Available As of Outstanding As of
Effective Expiration December 31,
December 31,
Description Date Date 2007 2006
2007 2006
Commercial Paper
The Hartford 11/10/86 N/A $ 2,000 $ 2,000 $ 373 $ 299
HLI [1] 2/7/97 N/A — 250 — —
Total commercial paper 2,000 2,250 373 299
Revolving Credit Facility
5-year revolving credit facility 8/9/07 8/9/12 2,000 1,600 — —
Line of Credit
Life Japan Operations [2] 9/18/02 1/5/09 45 42 — —
Total Commercial Paper, Revolving Credit Facility
and Line of Credit $ 4,045 $ 3,892 $ 373 $ 299
[1] In January 2007, the commercial paper program of HLI was terminated.
[2] As of December 31, 2007 and 2006, the Company’s Japanese operation line of credit in yen was ¥5 billion.
In August 2007, The Hartford amended and restated its existing credit facility. The revolving credit facility provides for up to $2.0
billion of unsecured credit. Of the total availability under the revolving credit facility, up to $100 is available to support letters of credit
issued on behalf of The Hartford or other subsidiaries of The Hartford. Under the revolving credit facility, the Company must maintain
a minimum level of consolidated net worth. In addition, the Company must not exceed a maximum ratio of debt to capitalization.
Quarterly, the Company certifies compliance with the financial covenants for the syndicate of participating financial institutions. As of
December 31, 2007, the Company was in compliance with all such covenants.
Interest Expense
The following table presents interest expense incurred for 2007, 2006 and 2005, respectively.
For the years ended December 31,
2007 2006 2005
Short-term debt $13 $31 $13
Long-term debt 250 246 239
Total interest expense $263 $277 $252
The weighted-average interest rate on commercial paper was 5.1%, 5.3% and 3.4% for 2007, 2006 and 2005, respectively.