Travelers 2014 Annual Report Download - page 220

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. DEBT (Continued)
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 to purchase the Company's subordinated debentures. Interest on each of the
instruments is paid semi
- annually.
The Company's consolidated balance sheet includes the debt instruments acquired in the merger, which were recorded at fair value as of the
acquisition date. The resulting fair value adjustment is being amortized over the remaining life of the respective debt instruments using the
effective
- interest method. The amortization of the fair value adjustment reduced interest expense by $1 million for each of the years ended
December 31, 2014 and 2013.
The following table presents merger
- related unamortized fair value adjustments and the related effective interest rate:
The Travelers Companies, Inc. fully and unconditionally guarantees 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 $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: 2015,
$400 million; 2016, $400 million; 2017, $450 million; 2018, $500 million; and 2019, $500 million.
Credit Agreement
The Company is party to a five - year, $1.0 billion revolving credit agreement with a syndicate of financial institutions that expires in June 2018.
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
219
Unamortized
Fair Value
Purchase
Adjustment at
December 31,
Effective
Interest Rate
to Maturity
(in millions)
Issue Rate
Maturity Date
2014
2013
Subordinated debentures
7.625
%
Dec. 2027
$
16
$
17
6.147
%
8.500
%
Dec. 2045
15
15
6.362
%
8.312
%
Jul. 2046
19
19
6.362
%
Total
$
50
$
51