Travelers 2005 Annual Report Download - page 115

103
redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption
on a semiannual basis at the then current Treasury Rate plus 20 basis points. The majority of the proceeds
was used to pay down the Company’s commercial paper outstanding, with the remainder used for general
corporate purposes.
On March 11, 2003, TPC issued $1.40 billion of senior notes comprising $400 million of 3.75% senior
notes due March 15, 2008, $500 million of 5.00% senior notes due March 15, 2013 and $500 million of
6.375% senior notes due March 15, 2033. The notes pay interest semi-annually on March 15 and
September 15 of each year, beginning September 15, 2003, are senior unsecured obligations and rank
equally with all of TPC’s other senior unsecured indebtedness. TPC may redeem some or all of the notes
prior to maturity by paying a “make-whole” premium based on U.S. Treasury rates. The net proceeds from
the sale of these notes were contributed to its primary subsidiary, Travelers Insurance Group
Holdings, Inc. (TIGHI), so that TIGHI could prepay and refinance $500 million of 3.60% indebtedness to
Citigroup and redeem $900 million aggregate principal amount of TIGHI’s 8.00% to 8.08% junior
subordinated debt securities held by subsidiary trusts. These trusts, in turn, used these funds to redeem
$900 million of preferred capital securities on April 9, 2003.
These senior notes were sold to qualified institutional buyers as defined under Rule 144A under the
Securities Act of 1933 (theSecurities Act) and outside the United States in reliance on Regulation S under
the Securities Act. Accordingly, the notes (the restricted notes) were not registered under the Securities
Act or any state securities laws and could not be transferred or resold except pursuant to certain
exemptions. As part of this offering, TPC agreed to file a registration statement under the Securities Act to
permit the exchange of the notes for registered notes (the Exchange Notes) having terms identical to those
of the senior notes described above (Exchange Offer). On April 14, 2003, TPC initiated the Exchange
Offer pursuant to a Form S-4 that was filed with the Securities and Exchange Commission. Accordingly,
each series of Exchange Notes has been registered under the SecuritiesAct, and the transfer restrictions
and registration rights relating to the restricted notes do not apply to the Exchange Notes.
Line of Credit Agreements. The Company maintains an $800 million commercial paper program with
back-up liquidity consistingof a bank credit agreement. In June 2005, the Company entered into a
$1.0 billion, five-year revolving credit agreement with a syndicate of financial institutions. The new credit
agreement replaced and consolidated the Company’s three prior bank credit agreements that had
collectively provided the Company access to $1.0 billion of bank credit lines. Pursuant to covenants in the
new credit agreement, the Company must maintain an excess of consolidated net worth over goodwill and
other intangible assets of not less than $10 billion at all times. The Company must also maintain a ratio of
total consolidated debt to the sum of total consolidated debt plus consolidated net worth of not greater
than 0.40 to 1.00. In addition, the credit agreement contains other customary restrictive covenants as well
as certain customary events of default, including with respect to a change in control. At December 31,
2005, the Company was in compliance with these covenants and all other covenants related to its respective
debt instruments outstanding. Pursuant to the terms of the credit agreement, the Company has an option
to increase the credit available under the facility, no more than once a year, up to a maximum facility
amount of $1.5 billion, subject to the satisfaction of a ratings requirement and certain other conditions.
There was no amount outstanding under the credit agreement as of December 31, 2005.
Shelf Registration. In December 2005, the Company filed with the Securities and Exchange
Commission a shelf registration statement for the potential offering and sale of securities. The Company
may offer these securities from time to time at prices and on other terms to be determined at the time of
offering.