Travelers 2010 Annual Report Download - page 222

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. DEBT (Continued)
The following table presents merger-related unamortized fair value adjustments and the related
effective interest rate:
Unamortized Fair
Value Purchase
Adjustment at Effective
December 31, Interest Rate
(in millions) Issue Rate Maturity Date 2010 2009 to Maturity
Senior notes ........................ 8.125% Apr. 2010 $— $ 3 4.257%
Subordinated debentures ............... 7.625% Dec. 2027 19 20 6.147%
8.500% Dec. 2045 16 16 6.362%
8.312% Jul. 2046 19 19 6.362%
Total ............................ $54 $58
On April 1, 2004, The Travelers Companies, Inc. fully and unconditionally guaranteed the payment
of all principal, premiums, if any, and interest on certain debt obligations of its subsidiaries TPC and
Travelers Insurance Group Holdings Inc. (TIGHI). The guarantees pertain to the $500 million 5.00%
notes due 2013, the $200 million 7.75% notes due 2026 and the $500 million 6.375% notes due 2033.
Maturities—The amount of debt obligations, other than commercial paper, that become due in
each of the next five years is as follows: 2011, $9 million; 2012, $250 million; 2013, $500 million; 2014,
none; and 2015, $400 million.
Line of Credit Agreement
On June 10, 2010, the Company entered into a three-year, $1.0 billion revolving credit agreement
with a syndicate of financial institutions, replacing its five-year, $1.0 billion credit agreement that
expired on that date. Pursuant to the credit agreement covenants, the Company must maintain a
minimum consolidated net worth (generally defined as shareholders’ equity plus certain trust preferred
and mandatorily convertible securities, reduced for goodwill and other intangible assets) of
$14.35 billion. The Company must also maintain a ratio of total debt to the sum of total 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, which is defined to include the acquisition of 35% or more of the
Company’s voting stock and certain changes in the composition of the Company’s board of directors.
At December 31, 2010, the Company was in compliance with these covenants. Generally, the cost of
borrowing under this agreement will range from LIBOR plus 100 basis points to LIBOR plus 175 basis
points depending on the Company’s credit ratings. At December 31, 2010, that cost would have been
LIBOR plus 125 basis points had there been any amounts outstanding under the credit agreement. This
line of credit also supports the Company’s commercial paper program.
Shelf Registration
In December 2008, the Company filed with the Securities and Exchange Commission a universal
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. During 2010 and 2009, the Company issued securities with a principal amount of $1.25 billion
and $500 million, respectively, under the shelf registration statement.
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