Travelers 2013 Annual Report Download - page 229

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. DEBT (Continued)
Maturities—The amount of debt obligations, other than commercial paper, that become due in
each of the next five years is as follows: 2014, none; 2015, $400 million; 2016, $400 million; 2017,
$450 million; and 2018, $500 million.
Credit Agreement
On June 7, 2013, the Company entered into a five-year, $1.0 billion revolving credit agreement
with a syndicate of financial institutions, replacing its three-year $1.0 billion credit agreement that was
due to expire on June 10, 2013. Pursuant to the credit agreement covenants, the Company must
maintain a minimum consolidated net worth, defined as shareholders’ equity determined in accordance
with GAAP plus (a) trust preferred securities (not to exceed 15% of total capital) and (b) mandatorily
convertible securities (combined with trust preferred securities, not to exceed 25% of total capital) less
goodwill and other intangible assets. That threshold is adjusted downward by an amount equal to 70%
of the aggregate amount of common stock repurchased by the Company after March 31, 2013, up to a
maximum deduction of $1.75 billion. The threshold was $14.01 billion at December 31, 2013 and could
decline to a minimum of $13.73 billion during the term of the credit agreement, subject to the
Company repurchasing an additional $400 million of its common stock. 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, 2013, the Company was in compliance with these covenants. Generally, the
cost of borrowing under this agreement will range from LIBOR plus 87.5 basis points to LIBOR plus
150 basis points, depending on the Company’s credit ratings. At December 31, 2013, that cost would
have been LIBOR plus 112.5 basis points, had there been any amounts outstanding under the credit
agreement. This credit agreement also supports the Company’s commercial paper program.
Shelf Registration
In June 2013, the Company filed with the Securities and Exchange Commission a universal shelf
registration statement for the potential offering and sale of securities to replace the Company’s
previous registration statement that had expired in the normal course of business. The Company may
offer these securities from time to time at prices and on other terms to be determined at the time of
offering.
9. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY
Authorized Shares
The number of authorized shares of the company is 1.755 billion, consisting of five million of
preferred stock, 1.745 billion shares of voting common stock and five million undesignated shares. The
Company’s articles of incorporation authorize the board of directors to establish, from the undesignated
shares, one or more classes and series of shares, and to further designate the type of shares and terms
thereof.
Preferred Stock
In May 2013, the Company’s shareholders voted to amend the Company’s Articles of
Incorporation to provide authority to issue up to five million additional shares of preferred stock.
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