Allstate 2008 Annual Report Download - page 289

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total debt outstanding by maturity at December 31 consisted of the following:
2008 2007
($ in millions)
Due within one year or less $ 750 $ —
Due after one year through 5 years 640 1,140
Due after 5 years through 10 years 919 900
Due after 10 years through 20 years — 250
Due after 20 years 3,350 3,350
Total debt $5,659 $5,640
The Allstate Bank received a $10 million long-term advance from the FHLB in April 2008, and another
$10 million advance in September 2008. The FHLB advances are secured with fixed income securities pledged to
the FHLB. During 2008, $1 million was repaid on the advances.
In 2007, the Company issued $500 million of Series A 6.50% and $500 million of Series B 6.125%
Fixed-to-Floating Rate Junior Subordinated Debentures (together the ‘‘Debentures’’). The net proceeds were used
for the repurchase of the Company’s common stock. The scheduled maturity dates for the Debentures are
May 15, 2057 and May 15, 2037 for Series A and Series B, respectively, with a final maturity date of May 15, 2067.
The Debentures may be redeemed (i) in whole or in part, at any time on or after May 15, 2037 or May 15, 2017
for Series A and Series B, respectively, at their principal amount plus accrued and unpaid interest to the date of
redemption, or (ii) in certain circumstances, in whole or in part, prior to May 15, 2037 and May 15, 2017 for
Series A and Series B, respectively, at their principal amount plus accrued and unpaid interest to the date of
redemption or, if greater, a make-whole price.
Interest on the Debentures is payable semi-annually at the stated fixed annual rate to May 15, 2037 and
May 15, 2017 for Series A and Series B, respectively, and then payable quarterly at an annual rate equal to the
three-month LIBOR plus 2.12% and 1.935% for Series A and Series B, respectively. The Company may elect at one
or more times to defer payment of interest on the Debentures for one or more consecutive interest periods that
do not exceed 10 years. Interest compounds during such deferral periods at the rate in effect for each period. The
interest deferral feature obligates the Company in certain circumstances to issue common stock or certain other
types of securities if it cannot otherwise raise sufficient funds to make the required interest payments. The
Company has reserved 75 million shares of its authorized and unissued common stock to satisfy this obligation.
In connection with the issuance of the Debentures, the Company entered into replacement capital covenants.
These covenants are not intended for the benefit of the holders of the Debentures and may not be enforced by
them. Rather, they are for the benefit of holders of one or more other designated series of the Company’s
indebtedness, initially the 6.90% Senior Debentures due 2038. Pursuant to these covenants, the Company has
agreed that it will not repay, redeem, or purchase the Debentures on or before May 15, 2067 and May 15, 2047
for Series A and Series B, respectively, unless, subject to certain limitations, the Company has received proceeds
in specified amounts from the issuance of specified securities. These covenants terminate in 2067 and 2047 for
Series A and Series B, respectively, or earlier upon the occurrence of certain events, including an acceleration of
the Debentures of the particular series due to the occurrence of an event of default. An event of default, as
defined by the supplemental indentures, includes default in the payment of interest or principal and bankruptcy
proceedings.
The Company is the primary beneficiary of a consolidated VIE used to acquire up to 38 automotive collision
repair stores (‘‘synthetic lease VIE’’). In 2006, the Company renewed the synthetic lease for a five-year term at a
floating rate due 2011. The Company’s Consolidated Statements of Financial Position include $40 million and
$40 million of property and equipment, net, and long-term debt as of December 31, 2008 and 2007, respectively.
To manage short-term liquidity, Allstate can issue commercial paper, draw on its credit facilities and engage
in securities repurchase agreements (see Note 2). The Company currently maintains a commercial paper program
and a credit facility as a potential source of funds. These include a $1.00 billion unsecured revolving credit facility
and a commercial paper program with a borrowing limit of $1.00 billion. The facility has an initial term of five
years expiring in 2012 with two optional one-year extensions that can be exercised at the end of any of the
remaining four years of the facility upon approval of existing or replacement lenders providing more than
two-thirds of the commitments to lend. This facility also contains an increase provision that would allow up to an
additional $500 million of borrowing provided the increased portion could be fully syndicated at a later date
among existing or new lenders. This facility has a financial covenant requiring the Company not to exceed a
37.5% debt to capital resources ratio as defined in the agreement. Although the right to borrow under the facility
is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are
based on the ratings of the Company’s senior, unsecured, nonguaranteed long-term debt. The total amount
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Notes