Travelers 2008 Annual Report Download - page 128

The Company can redeem the debentures at its option, in whole or in part, at any time on or after
March 15, 2017 at a redemption price of 100% of the principal amount being redeemed plus accrued
but unpaid interest. The Company can redeem the debentures at its option prior to March 15, 2017
(a) in whole at any time or in part from time to time or (b) in whole, but not in part, in the event of
certain tax or rating agency events relating to the debentures, at a redemption price equal to the
greater of 100% of the principal amount being redeemed and the applicable make-whole amount, in
each case plus any accrued and unpaid interest.
In connection with the offering of the debentures, the Company entered into a ‘‘replacement
capital covenant’’ for the benefit of holders of one or more designated series of the Company’s
indebtedness (which will initially be the 6.750% senior notes due 2036). Under the terms of the
replacement capital covenant, if the Company redeems the debentures at any time prior to March 15,
2047 it can only do so with the proceeds of securities that are treated by the rating agencies as having
similar equity content to the debentures.
In March 2007, the Company’s $500 million, 5.75% senior notes matured and were fully paid.
In April 2007, the Company completed the redemption of its outstanding $893 million, 4.50%
convertible junior subordinated notes due in 2032 (the notes). The notes were originally issued by
Travelers Property Casualty Corp., and the Company assumed certain obligations relating to the notes
pursuant to a Second Supplemental Indenture dated April 1, 2004. Each note had a principal amount
of $25.00. The redemption price for each note was $25.5625 plus $0.009375 of accrued and unpaid
interest. Any note called for redemption could be surrendered for conversion into common stock
before the close of business on April 17, 2007. Each note was convertible into 0.4684 shares of common
stock of The Travelers Companies, Inc. Holders of $36 million of the notes tendered their certificates
in exchange for the issuance of 670,910 of the Company’s common shares. The remaining $857 million
of notes were redeemed for cash, along with accrued interest to the date of redemption. The Company
recorded a $39 million pretax loss ($25 million after-tax) in other revenues in the second quarter of
2007 related to the redemption, consisting of the redemption premium paid and the write-off of
remaining unamortized issuance costs.
In May 2007, the Company issued $250 million aggregate principal amount of 5.375% senior notes
due June 15, 2012 (the 2012 senior notes), $450 million aggregate principal amount of 5.750% senior
notes due December 15, 2017 (the 2017 senior notes), and $800 million aggregate principal amount of
6.250% senior notes due June 15, 2037 (the 2037 senior notes). The total net proceeds of these three
senior note issuances, after original issuance discounts and the deduction of underwriting expenses and
commissions and other expenses, were approximately $1.47 billion. Interest on each of the senior note
issuances is payable semi-annually on June 15 and December 15, commencing December 15, 2007.
Each series of senior notes is redeemable in whole at any time or in part from time to time, at the
Company’s option, at a redemption price equal to the greater of (a) 100% of the principal amount of
senior notes to be redeemed, or (b) 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 semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the then current Treasury Rate plus 12.5 basis points for the
2012 senior notes, 15 basis points for the 2017 senior notes and 20 basis points for the 2037 senior
notes. The Company applied a portion of the net proceeds of this offering to repay approximately
$442 million of senior notes maturing on August 16, 2007 and to repay approximately $42 million of
medium-term notes maturing in the third quarter of 2007. The remaining proceeds were used for
general corporate purposes. Prior to applying these proceeds, the Company invested them in
investment grade, marketable securities.
In August 2007, the Company’s $442 million, 5.01% senior notes matured and were fully paid.
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