Travelers 2005 Annual Report Download - page 188

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
176
10. DEBT (Continued)
Company (maturing in 2007). Total annual distributions on the equity units were at the rate of 9.00%,
consistingof interest on the note at a rate of 5.25% and fee payments under the forward contract of 3.75%.
Holders of the equity units had the opportunity to participate in a required remarketing of the senior note
component. The initial remarketing date was May 11, 2005. On that date, the notes were successfully
remarketed, and the interest rate on the notes was reset to 5.01%, from 5.25%, effective May 16, 2005. The
remarketed notes mature on August 16, 2007. The forward purchase contract required the investor to
purchase, for $50, a variable numberof shares of the Company’s common stock on the settlement date of
August 16, 2005. The number of shares purchased was determined based on a formula that considered the
average closing price of the Company’s common stock on each of 20 consecutive trading days ending on
the third trading day immediately preceding the settlement date, in relation to the $24.20 per share price of
common stock at the time of the offering. On the August 16, 2005 settlement date, the Company issued
15.2 million common shares and received total proceeds of $442 million.
5.50% Senior Notes— In November 2005, the Company issued $400 million of 5.50% senior notes due
December 1, 2015. The notes pay interest semi-annually on June 1 and December 1 of each year,
beginning June 1, 2006, are senior unsecured obligations and rank equally with all of the Company’s other
senior unsecured indebtedness. The Company may redeem some or all of the notes prior to maturity at a
redemption price equal to the greater of: 100% of the principal amount of senior notes to be redeemed; or
the sum of the present values of the remaining scheduled payments of principal and interest on the senior
notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of
redemption on a semiannual basis at the then currentTreasury Rate plus 20 basis points. The majority of
the proceeds from the issuance of the 5.50% senior notes was used to pay down the Company’s commercial
paper outstanding, with the remainder used for general corporate purposes.
Zero CouponConvertible Notes—The zero coupon convertible notes mature in 2009, but are
redeemable at the option of the Company for an amount equal to the original issue price plus accreted
original issue discount. Eachnote is convertible at the option of the holder at any time on or prior to
maturity, unless previously redeemed by the Company, into common stock of the Company at a conversion
rate of 16.6433 shares for each $1,000 principal amount of notes.
3.75%, 5.00%, 6.375% Senior Notes— On March 11, 2003, the Company 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 March15 and September 15 of each year, beginning September 15, 2003, are
senior unsecured obligations and rank equally with all of the Company’s other senior unsecured
indebtedness. The Company 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 TIGHI, so that TIGHI could prepay and refinance $500 million of 3.60% indebtedness to
Citigroup and to redeem $900 million aggregate principal amount of TIGHI’s 8.00% and 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.