Unum 2008 Annual Report Download - page 89

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the non-recourse debt and associated capital of Tailwind Holdings and Northwind Holdings, was 21.5 percent at December 31, 2008, compared
to 21.4 percent at December 31, 2007. Our leverage ratio, when calculated using consolidated debt to total consolidated capital, was 26.6 percent
at December 31, 2008 compared to 26.4 percent at December 31, 2007.
We monitor our compliance with our debt covenants. There are no significant financial covenants associated with any of our outstanding
debt obligations. A ratings downgrade from either S&P or Moody’s with respect to the “shadow” or underlying debt rating on the non-recourse
debt issued by Tailwind Holdings or Northwind Holdings could cause an increase in the fee paid to the third party guarantor on those debt
issuances but would not cause a breach. We remain in compliance with all debt covenants and have not observed any current trends that
would cause a breach of any debt covenants.
Purchases and Retirement of Debt
During 2008, we retired the remaining $175.0 million of our 5.997% senior notes. During 2008, we made principal payments of
$59.3 million and $10.0 million on our senior secured non-recourse variable rate notes issued by Northwind Holdings and Tailwind Holdings,
respectively. We also purchased and retired $36.6 million of our 6.85% senior debentures due 2015 and $17.8 million of our 5.859% senior
notes due May 2009.
In 2007, we purchased and retired $17.5 million of our outstanding 6.75% notes scheduled to mature in 2028. Pursuant to a cash
tender offer, we purchased and retired $23.5 million aggregate liquidation amount of the 7.405% junior subordinated debt securities due
2038; $99.9 million aggregate principal amount of the 7.625% notes due 2011; $210.5 million aggregate principal amount of the 7.375%
notes due 2032; and $66.1 million aggregate principal amount of the 6.75% notes due 2028. We also called and retired all $150.0 million
principal amount of our outstanding 7.25% notes scheduled to mature in 2032.
Also in 2007, in open market transactions, we purchased $34.5 million of our outstanding 6.85% notes due 2015 and $17.5 million of
our outstanding senior secured notes issued by Tailwind Holdings. In February 2007, the scheduled remarketing of the senior note element
of the 2004 units occurred, as stipulated by the terms of the original offering, and we reset the interest rate of $300.0 million of senior notes
due May 15, 2009 to 5.859%. We purchased $150.0 million of the senior notes in the remarketing which were subsequently retired. In
May 2007, we settled the purchase contract element of the units by issuing 17.7 million shares of common stock. We received proceeds of
approximately $300.0 million from the transaction.
In 2006, pursuant to a cash tender offer, we purchased and retired $50.0 million aggregate liquidation amount of our 7.405% junior
subordinated debt securities due 2038 and $250.0 million aggregate principal amount of our outstanding 7.625% notes due 2011. Also in
2006, in open market transactions, we purchased $32.0 million of our outstanding 6.85% notes due 2015.
In February 2006, the scheduled remarketing of the senior note element of the 2003 units occurred, as stipulated by the terms of the
original offering, and we reset the interest rate on $575.0 million of senior notes due May 15, 2008 to 5.997%. We purchased $400.0 million
of the senior notes in the remarketing which were subsequently retired. In May 2006, we settled the purchase contract element of the units
by issuing 43.3 million shares of common stock. We received proceeds of approximately $575.0 million from the transaction.
Issuance of Debt
In 2007, Northwind Holdings issued $800.0 million floating rate, insured, senior, secured notes in a private offering. Recourse for the
payment of principal, interest, and other amounts due on the notes will be limited to the assets of Northwind Holdings, consisting primarily
of the stock of its sole subsidiary Northwind Re, a Vermont special purpose financial captive insurance company. Northwind Holdings’
ability to meet its payment obligations under the notes will be dependent principally upon its receipt of dividends from Northwind Re. The
ability of Northwind Re to pay dividends to Northwind Holdings will depend on its satisfaction of applicable regulatory requirements and on
the performance of the reinsured claims of Provident, Paul Revere and Unum America (the ceding insurers) reinsured by Northwind Re.
None of Unum Group, the ceding insurers, Northwind Re or any other affiliate of Northwind Holdings is an obligor or guarantor on the
notes. The balance outstanding on these notes was $740.7 million at December 31, 2008.
In 2006, Tailwind Holdings issued $130.0 million floating rate, insured, senior, secured notes in a private offering. Recourse for the
payment of principal, interest, and other amounts due on the notes will be limited to the assets of Tailwind Holdings, consisting primarily of
the stock of its sole subsidiary Tailwind Re, a South Carolina special purpose financial captive insurance company. Tailwind Holdings’ ability
to meet its payment obligations under the notes will be dependent principally upon its receipt of dividends from Tailwind Re. The ability of