Unum 2009 Annual Report Download - page 127

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125
Unum 2009 Annual Report
Senior Secured Notes
In 2007, Northwind Holdings, LLC (Northwind Holdings), a wholly-owned subsidiary of Unum Group, issued $800.0 million of insured,
senior, secured notes due 2037 (the Northwind notes) in a private offering. The Northwind notes bear interest at a floating rate equal to the
three-month LIBOR plus 0.78%.
Northwind Holdings’ ability to meet its obligations to pay principal, interest, and other amounts due on the Northwind notes will be
dependent principally on its receipt of dividends from Northwind Reinsurance Company (Northwind Re), the sole subsidiary of Northwind
Holdings. Northwind Re reinsured the risks attributable to specified individual disability insurance policies issued by or reinsured by Provident
Life and Accident Insurance Company, Unum Life Insurance Company of America (Unum America), and The Paul Revere Life Insurance
Company (collectively, the ceding insurers) pursuant to separate reinsurance agreements between Northwind Re and each of the ceding
insurers. The ability of Northwind Re to pay dividends to Northwind Holdings will depend on its satisfaction of applicable regulatory
requirements and the performance of the reinsured policies.
Recourse for the payment of principal, interest, and other amounts due on the Northwind notes is limited to the collateral for the
Northwind notes and the other assets, if any, of Northwind Holdings. The collateral consists of a first priority, perfected security interest in
(a) the debt service coverage account (Northwind DSCA) that Northwind Holdings is required to maintain in accordance with the indenture
pursuant to which the Northwind notes were issued (the Northwind indenture), (b) the capital stock of Northwind Re and the dividends and
distributions on such capital stock, and (c) Northwind Holdings’ rights under the transaction documents related to the Northwind notes to
which Northwind Holdings is a party. At December 31, 2009 the amount in the Northwind DSCA was $11.9 million. None of Unum Group, the
ceding insurers, Northwind Re, or any other affiliate of Northwind Holdings is an obligor or guarantor with respect to the Northwind notes.
Northwind Holdings is required to repay a portion of the outstanding principal under the Northwind notes at par on the quarterly
scheduled payment dates under the Northwind notes in an amount equal to the lesser of (i) a targeted amortization amount as defined
in the Northwind indenture and (ii) the amount of the remaining available funds in the Northwind DSCA minus an amount equal to the
minimum balance that is required to be maintained in the Northwind DSCA under the Northwind indenture, provided that Northwind
Holdings has sufficient funds available to pay its other expenses, including interest payments on the Northwind notes, and to maintain the
minimum balance in the Northwind DSCA as required under the Northwind indenture. During 2009 and 2008, Northwind Holdings made
principal payments of $48.0 million and $59.3 million, respectively, on the Northwind notes.
In 2006, Tailwind Holdings, LLC (Tailwind Holdings), a wholly-owned subsidiary of Unum Group, issued $130.0 million of insured, senior,
secured notes due 2036 (the Tailwind notes) in a private offering. The Tailwind notes bear interest at a floating rate equal to the three-month
LIBOR plus 0.35%.