The Hartford 2010 Annual Report Download - page 203

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-75
14. Debt (continued)
Junior Subordinated Debentures
On June 6, 2008, the Company issued $500 aggregate principal amount of 8.125% fixed-to-floating rate junior subordinated debentures
(the “debentures”) due June 15, 2068 for net proceeds of approximately $493, after deducting underwriting discounts and expenses from
the offering. The debentures bear interest at an annual fixed rate of 8.125% from the date of issuance to, but excluding, June 15, 2018,
payable semi-annually in arrears on June 15 and December 15. From and including June 15, 2018, the debentures will bear interest at an
annual rate, reset quarterly, equal to three-month LIBOR plus 4.6025%, payable quarterly in arrears on March 15, June 15, September
15 and December 15 of each year. The Company has the right, on one or more occasions, to defer the payment of interest on the
debentures. The Company may defer interest for up to ten consecutive years without giving rise to an event of default. Deferred interest
will accumulate additional interest at an annual rate equal to the annual interest rate then applicable to the debentures. If the Company
defers interest for five consecutive years or, if earlier, pays current interest during a deferral period, which may be paid from any source
of funds, the Company will be required to pay deferred interest from proceeds from the sale of certain qualifying securities.
The debentures carry a scheduled maturity date of June 15, 2038 and a final maturity date of June 15, 2068. During the 180-day period
ending on a notice date not more than fifteen and not less than ten business days prior to the scheduled maturity date, the Company is
required to use commercially reasonable efforts to sell certain qualifying replacement securities sufficient to permit repayment of the
debentures at the scheduled maturity date. If any debentures remain outstanding after the scheduled maturity date, the unpaid amount
will remain outstanding until the Company has raised sufficient proceeds from the sale of qualifying replacement 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.
Subject to the replacement capital covenant described below, the Company can redeem the debentures at its option, in whole or in part,
at any time on or after June 15, 2018 at a redemption price of 100% of the principal amount being redeemed plus accrued but unpaid
interest. The Company can redeem the debentures at its option prior to June 15, 2018 (a) in whole at any time or in part from time to
time or (b) in whole, but not in part, in the event of certain tax or rating agency events relating to the debentures, at a redemption price
equal to the greater of 100% of the principal amount being redeemed and the applicable make-whole amount, in each case plus any
accrued and unpaid interest.
In connection with the offering of the debentures, the Company entered into a "replacement capital covenant" for the benefit of holders
of one or more designated series of the Company's indebtedness, initially the Company’ s 6.1% notes due 2041. Under the terms of the
replacement capital covenant, if the Company redeems the debentures at any time prior to June 15, 2048 it can only do so with the
proceeds from the sale of certain qualifying replacement securities.
For a discussion of the 10.0% junior subordinated debentures due 2068, see Note 21.
Long-Term Debt Maturities
The following table reflects the Company’ s long-term debt maturities.
2011 $ 400
2012 —
2013 320
2014 200
2015 500
Thereafter 5,805
Capital Lease Obligations
The Company recorded capital leases of $0 and $68 in 2010 and 2009, respectively. Capital lease obligations are included in long-term
debt, except for the current maturities, which are included in short-term debt, in the Consolidated Balance Sheet as of December 31,
2010 and 2009, respectively. In May 2007, the Company entered into a firm commitment to purchase office buildings and recorded a
capital lease of $114. This purchase was completed in January 2010.
Shelf Registrations
On August 4, 2010, The Hartford filed with the Securities and Exchange Commission (the “SEC”) an automatic shelf registration
statement (Registration No. 333-168532) for the potential offering and sale of debt and equity securities. The registration statement
allows for the following types of securities to be offered: debt securities, junior subordinated debt securities, preferred stock, common
stock, depositary shares, warrants, stock purchase contracts, and stock purchase units. In that The Hartford is a well-known seasoned
issuer, as defined in Rule 405 under the Securities Act of 1933, the registration statement went effective immediately upon filing and
The Hartford may offer and sell an unlimited amount of securities under the registration statement during the three-year life of the shelf.