Aetna 2006 Annual Report Download - page 77

13. Debt
In 2005, we filed a universal shelf registration statement to sell debt securities, common stock, preferred stock,
purchase contracts, warrants to purchase common stock or warrants to purchase debt securities, or units that may
include any of these securities or securities of other entities. Specific terms of these securities will be provided in
prospectus supplements. This registration statement replaced our February 2001 shelf registration statement
which was not fully utilized. In June 2006, we issued $2.0 billion of senior notes under this universal shelf
registration statement, comprised of $450 million of 5.75% senior notes due 2011, $750 million of 6.0% senior
notes due 2016 and $800 million of 6.625% senior notes due 2036. The proceeds from these senior notes were
used to redeem the entire $700 million aggregate principal amount of our 8.5% senior notes due 2041 and to
repay approximately $400 million of commercial paper borrowings, outstanding since the March 1, 2006
maturity of the entire $450 million aggregate principal amount of our 7.375% senior notes. The remainder of the
net proceeds were used for general corporate purposes, including share repurchases. In connection with the
redemption of the $700 million, 8.5% senior notes, we wrote-off deferred debt issuance costs associated with
those senior notes and recognized the deferred gain from the interest rate swaps that hedged those senior notes,
resulting in a $8 million after tax ($12 million pretax) non-cash charge in operating expenses in 2006. Refer to
Note 15 beginning on page 76 for additional information concerning our derivative financial instruments.
The carrying value of long-term debt at December 31, 2006 and 2005 was as follows:
(Millions)
Senior notes, 7.375%, due 2006
(1)
-$ 450.0$
Senior notes, 5.75%, due 2011 449.6 -
Senior notes, 7.875%, due 2011 448.4 448.1
Senior notes, 6.0%, due 2016 745.8 -
Senior notes, 6.625%, due 2036 798.5 -
Senior notes, 8.50%, due 2041
(2)
- 707.6
Total long-term debt 2,442.3 1,605.7
Less current portion of long-term debt
(1)
- (450.0)
Long-term debt, less current portion 2,442.3$ 1,155.7$
2006 2005
(1) The 7.375% senior notes were repaid in February 2006.
(2) The 8.50% senior notes were redeemed and repaid in June 2006.
At December 31, 2006, we have an unsecured $1 billion, five-year revolving credit agreement (the “Facility”) with
several financial institutions which terminates in January 2012. The Facility provides for up to $150 million of
letters of credit to be issued at our request, which count as usage of the available commitments under the Facility.
The Facility permits the aggregate commitments under the Facility to be expanded to a maximum of $1.35 billion
upon our agreement with one or more financial institutions. Various interest rate options are available under the
Facility. Any revolving borrowings mature on the termination date of the Facility. We pay facility fees on the
Facility ranging from .05% to .175% per annum, depending upon our long-term senior unsecured debt rating. The
facility fee was .07% at December 31, 2006. The Facility contains a financial covenant that requires us to maintain
a ratio of total debt to consolidated capitalization as of the end of each fiscal quarter ending on or after December
31, 2005 at or below .4 to 1.0. For this purpose, consolidated capitalization equals the sum of shareholders’ equity,
excluding any overfunded or underfunded status of our pension and OPEB plans in accordance with FAS 158 and
any net unrealized capital gains and losses, and total debt (as defined in the Facility). We met this requirement at
December 31, 2006.
We paid $159 million, $121 million and $104 million in interest in 2006, 2005 and 2004, respectively.
In addition, at December 31, 2006, certain of our subsidiaries have a one-year $45 million variable funding credit
program with a bank to provide short-term liquidity to those subsidiaries. Borrowings under this program are
secured by certain assets of those subsidiaries. At December 31, 2006, there was $45 million outstanding under
this program at an interest rate of 6.1%.
Page 75