Travelers 2012 Annual Report Download - page 224

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. DEBT (Continued)
Agreement’’ discussion that follows). Interest rates on commercial paper issued in 2012 ranged from
0.1% to 0.2%, and in 2011 ranged from 0.1% to 0.3%.
Senior Notes—The Company’s various senior debt issues are unsecured obligations that rank
equally with one another. Interest payments are made semi-annually. The Company generally may
redeem some or all of the notes prior to maturity in accordance with terms unique to each debt
instrument.
Junior Subordinated Debentures—The Company’s $107 million remaining aggregate principal
amount of 6.25% fixed-to-floating rate debentures bear interest at an annual rate of 6.25% from the
date of issuance to, but excluding, March 15, 2017, payable semi-annually in arrears on March 15 and
September 15. From and including March 15, 2017, the debentures will bear interest at an annual rate
equal to three-month LIBOR plus 2.215%, payable quarterly on March 15, June 15, September 15 and
December 15 of each year. 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.
The Company has the right, on one or more occasions, to defer the payment of interest on the
debentures. The Company will not be required to settle deferred interest until it has deferred interest
for five consecutive years or, if earlier, made a payment of current interest during a deferral period.
The Company may defer interest for up to ten consecutive years without giving rise to an event of
default. Deferred interest will accumulate additional interest at an annual rate equal to the annual
interest rate then applicable to the debentures.
The debentures have a final maturity date of March 15, 2067 and a scheduled maturity date of
March 15, 2037. The Company can redeem the debentures at its option any time (as described above)
using any source of funds, including cash. If the Company chooses not to redeem the debentures, then
during the 180-day period ending not more than 15 and not less than ten business days prior to the
scheduled maturity date, the Company will be required to use commercially reasonable efforts to sell
enough qualifying capital securities to permit repayment of the debentures at the scheduled maturity
date. If any debentures remain outstanding after the scheduled maturity date, unless and until the
Company redeems the debentures (as described above) using any source of funds, including cash, the
Company shall be required to use its commercially reasonable efforts on a quarterly basis to raise
sufficient proceeds from the sale of qualifying capital securities to permit the repayment in full of the
debentures. If there are remaining debentures at the final maturity date, the Company is required to
redeem the debentures using any source of funds. Qualifying capital securities are securities (other than
common stock, qualifying warrants, mandatorily convertible preferred stock, debt exchangeable for
common equity, and debt exchangeable for preferred equity) which generally are treated by the ratings
agencies as having similar equity content to the debentures.
The Company’s three other junior subordinated debenture instruments are all similar in nature to
each other. Three separate business trusts issued preferred securities to investors and used the proceeds
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