Travelers 2003 Annual Report Download - page 130

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128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY
Mandatorily Redeemable Securities of Subsidiary Trusts
TIGHI formed statutory business trusts under the laws of the state of Delaware, which exist for the exclusive
purposes of (i) issuing Trust Securities representing undivided beneficial interests in the assets of the Trust; (ii)
investing the gross proceeds of the Trust Securities in Junior Subordinated Deferrable Interest Debentures
(Junior Subordinated Debentures) of its parent; and (iii) engaging in only those activities necessary or incidental
thereto. These Junior Subordinated Debentures and the related income effects are eliminated in the consolidated
financial statements. On April 9, 2003, TIGHI redeemed the TIGHI debentures held by the subsidiary trusts.
The subsidiary trusts, in turn, used these funds to redeem the TIGHI securities. The financial structure of each of
Travelers P&C Capital I and Travelers P&C Capital II (the subsidiary trusts) at December 31, 2002 was as
follows:
Travelers P&C Travelers P&C
Ca
p
ital I Ca
p
ital II
Trust Securities
(
TIGHI Securities
)
Issuance date A
p
ril 1996 Ma
y
1996
Securities issued 32,000,000 4,000,000
Li
q
uidation
p
reference
p
er securit
y
$ 25 $ 25
Li
q
uidation value
(
in millions
)
$ 800.0 $ 100.0
Cou
p
on rate 8.08% 8.00%
Distributions
p
a
y
able
Q
uarterl
y
Q
uarterl
y
Distributions
g
uaranteed b
y
(1) TIGHI TIGHI
Common Securities issued to TIGHI 989,720 123,720
Junior Subordinated Debentures
(
TIGHI Debentures
)
Amount owned
(
in millions
)
$ 825.0 $ 103.0
Cou
p
on rate 8.08% 8.00%
Interest
p
a
y
able
Q
uarterl
y
Q
uarterl
y
Maturit
y
date A
p
ril 30, 2036 Ma
y
15, 2036
Redeemable b
y
issuer on or afte
r
A
p
ril 30, 2001 Ma
y
15, 2001
(1) Under the arrangements, taken as a whole, payments due are fully and unconditionally guaranteed on a
subordinated basis. During May 2002, TPC fully and unconditionally guaranteed the payment of all
principal, premium, if any, and interest of the debt obligations of TIGHI.
The obligations of TIGHI with respect to the TIGHI Debentures, when considered together with certain
undertakings of TIGHI with respect to the subsidiary trusts, constitute full and unconditional guarantees by
TIGHI of the subsidiary trusts’ obligations under the respective TIGHI Securities. The TIGHI Securities are
classified in the consolidated balance sheet as “TIGHI-obligated mandatory redeemable securities of subsidiary
trusts holding solely junior subordinated debt securities of TIGHI” at their liquidation value of $900.0 million.
Distributions on the TIGHI Securities have been classified as interest expense in the consolidated statement of
income.