Ameriprise 2006 Annual Report Download - page 88

arrears. The Company has the option to defer interest payments,
subject to certain limitations. In addition, interest payments are
mandatorily deferred if the Company does not meet specified
capital adequacy, net income or shareholders’ equity levels.
Upon an optional or mandatory deferral, the Company is subject
to certain restrictions on dividends or distributions related to its
capital stock, as well as payments of principal, interest or
guarantees related to debt securities issued by the Company or
its subsidiaries that rank equally with or junior to the junior
notes. In addition, in connection with an optional or mandatory
deferral, the Company may also be required to sell shares of its
common stock to make interest payments. The junior notes
mature June 1, 2066. The Company may redeem the junior
notes, in whole or in part, on or after June 1, 2016 at the par
redemption amount specified in the indenture agreement, as
amended, provided that if the junior notes are not redeemed in
whole, at least $50 million aggregate principal amount of the
junior notes (excluding any junior notes held by the Company or
any of its affiliates) remains outstanding after the redemption.
Prior to June 1, 2016, the Company may redeem the junior notes
in whole but not in part at any time at the make-whole
redemption amount specified in the indenture agreement, as
amended. The net proceeds from the issuance were for general
corporate purposes.
The $50 million of unsecured medium-term notes were issued
in 1994 in a private placement to institutional investors. The
medium-term notes were repaid in 2006.
The Company began consolidating certain limited partner-
ships, including certain property fund limited partnerships, as
a result of its adoption of EITF 04-5 as of January 1, 2006.
The property funds of these limited partnerships are managed
by the Company’s subsidiary, Threadneedle. The effect of this
consolidation as of January 1, 2006 included an increase of
$136 million in non-recourse debt related to the property
funds. In September 2006, the partnerships repaid the out-
standing non-recourse debt following a restructuring of the
partnership capital.
The fixed and floating rate notes due 2011 are non-recourse
debt of a CDO. The debt will be extinguished from the cash
flows of the investments held within the portfolio of the CDO,
which assets are held for the benefit of the CDO debt holders.
The related interest expense on these notes is reflected in net
investment income.
On September 30, 2005, the Company obtained an unsecured
revolving credit facility for $750 million expiring in
September 2010 from various third-party financial institutions.
Under the terms of the credit agreement, the Company may
increase the amount of this facility to $1.0 billion. As of
December 31, 2006 and 2005, no borrowings were outstand-
ing under this facility. Outstanding letters of credit issued
against this facility were $5 million and $1 million as of
December 31, 2006 and 2005, respectively. The Company has
agreed under this credit agreement not to pledge the shares of
its principal subsidiaries and was in compliance with this
covenant as of December 31, 2006 and 2005.
The Company paid to American Express $1.5 billion in
September 2005 to close out a $1.1 billion revolving credit
facility, pay off a $253 million fixed rate loan and settle a
$136 million net intercompany payable. The proceeds from the
bridge loan mentioned above were used to repay these obligations.
On August 5, 2005, the Company repaid $270 million of
intercompany debt and accrued interest related to construction
financing using cash received from the transfer of the
Company’s 50% ownership interest in AEIDC to American
Express and proceeds from the sale of the Company’s interest
in a CDO securitization trust.
At December 31, 2006, future maturities of debt were as follows:
(in millions)
2007 $ —
2008 —
2009 —
2010 800
2011 225
Thereafter 1,200
Total future maturities $ 2,225
16. Related Party Transactions
The Company may engage in transactions in the ordinary
course of business with significant shareholders or their
subsidiaries, between the Company and its directors and
officers or with other companies whose directors or officers
may also serve as directors or officers for the Company or its
subsidiaries. The Company carries out these transactions on
customary terms. Other than for the share repurchase from
Berkshire Hathaway Inc. and subsidiaries described below, the
transactions have not had a material impact on the Company’s
consolidated results of operations or financial condition.
Berkshire Hathaway Inc. (“Berkshire”) and subsidiaries
owned approximately 3% and 12% of the Company’s common
stock at December 31, 2006 and 2005, respectively. On
March 29, 2006, the Company entered into a Stock Purchase
and Sale Agreement with Warren E. Buffet and Berkshire to
repurchase 6.4 million shares of the Company’s common
stock. The repurchase was completed on March 29, 2006 at a
price per share equal to the March 29, 2006 closing price
of $42.91.
Davis Selected Advisors, L.P. or its affiliates (“Davis”) owned
approximately 9% and 8% of the Company’s common stock at
December 31, 2006 and 2005, respectively. In the ordinary
course of business, the Company obtains investment advisory
or sub-advisory services from Davis. The Company, or the
mutual funds or other clients that the Company provides
advisory services to, pay fees to Davis for its services. In the
ordinary course of business, Davis pays fees to the Company for
distribution services of Davis’ products to the Company’s clients.
86 Ameriprise Financial, Inc. 2006 Annual Report