The Hartford 2008 Annual Report Download - page 311

Table of Contents
Commercial Paper, Revolving Credit Facility and Line of Credit
The table below details the Company’s short-term debt programs and the applicable balances outstanding.
Maximum Available As of Outstanding As of
Effective Expiration December 31, December 31,
Description Date Date 2008 2007 2008 2007
Commercial Paper
The Hartford 11/10/86 N/A $ 2,000 $ 2,000 $ 374 $ 373
Revolving Credit Facility
5-year revolving credit
facility 8/9/07 8/9/12 1,900 2,000 — —
Line of Credit
Life Japan Operations [1] 9/18/02 1/4/10 55 45 — —
Total Commercial Paper,
Revolving Credit
Facility and Line of
Credit $ 3,955 $ 4,045 $ 374 $ 373
[1] As of December 31, 2008 and 2007, the Company’s Japanese operation line of credit in yen was ¥5 billion.
The revolving credit facility provides for up to $1.9 billion of unsecured credit, which excludes a $100 commitment from an
affiliate of Lehman Brothers. Of the total availability under the revolving credit facility, up to $100 is available to support
letters of credit issued on behalf of The Hartford or other subsidiaries of The Hartford. Under the revolving credit facility,
the Company must maintain a minimum level of consolidated net worth. In addition, the Company must not exceed a
maximum ratio of debt to capitalization. Quarterly, the Company certifies compliance with the financial covenants for the
syndicate of participating financial institutions. As of December 31, 2008, the Company was in compliance with all such
covenants.
The Federal Reserve Board authorized the Commercial Paper Funding Facility (“CPFF”) on October 7, 2008 under
Section 13(3) of the Federal Reserve Act to provide a liquidity backstop to U.S. issuers of commercial paper. The CPFF is
intended to improve liquidity in short-term funding markets by increasing the availability of term commercial paper funding
to issuers and by providing greater assurance to both issuers and investors that firms will be able to roll over their maturing
commercial paper.
The Company registered with the CPFF in order to sell up to a maximum of $375 to the facility of which it has issued the
full amount as of December 31, 2008. The Company’s commercial paper must be rated A-1/P-1/F1 by at least two ratings
agencies to be eligible for the program. Moody’s, S&P and Fitch all recently downgraded our commercial paper rating,
rendering the Company ineligible to sell additional commercial paper under the CPFF program going forward. As a result,
we will be required to pay the maturing commercial paper issued under the CPFF program from existing sources of
liquidity.
While The Hartford’s maximum borrowings available under its commercial paper program are $2.0 billion, which includes
the $375 from the CPFF, the Company is dependent upon market conditions, including recent market conditions, to finance
the remaining available commercial paper with investors.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the
financial condition, results of operations, liquidity, or capital resources of the Company, except for the contingent capital
facility described above and the following:
• The Company has unfunded commitments to purchase investments in limited partnerships, mortgage and construction
loans of about $1.1 billion as disclosed in Note 12 of Notes to Consolidated Financial Statements.
• Warrants issued to Allianz to purchase 34,806,452 shares of the Company’s common stock, classified at issuance in
equity at a fair value of $276. See Note 21 of Notes to Consolidated Financial Statements.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009