Humana 2011 Annual Report Download - page 118

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. DEBT
The carrying value of long-term debt outstanding was as follows at December 31, 2011 and 2010:
2011 2010
(in millions)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016 ............... $ 530 $ 535
$500 million, 7.20% due June 15, 2018 .............. 507 508
$300 million, 6.30% due August 1, 2018 ............. 319 322
$250 million, 8.15% due June 15, 2038 .............. 267 267
Total senior notes ........................... 1,623 1,632
Other long-term borrowings ....................... 36 37
Total long-term debt ..................... $1,659 $1,669
Senior Notes
Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal
amount plus accrued interest and a specified make-whole amount. The 7.20% and 8.15% senior notes are subject
to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded)
and contain a change of control provision that may require us to purchase the notes under certain circumstances.
Prior to 2009, we were parties to interest-rate swap agreements that exchanged the fixed interest rate under
our senior notes for a variable interest rate based on LIBOR. As a result, the carrying value of the senior notes
was adjusted to reflect changes in value caused by an increase or decrease in interest rates. During 2008, we
terminated all of our swap agreements. The cumulative adjustment to the carrying value of our senior notes was
$103 million as of the termination date which is being amortized as a reduction to interest expense over the
remaining term of the senior notes, resulting in a weighted-average effective interest rate fixed at 6.08%. The
unamortized carrying value adjustment was $74 million as of December 31, 2011 and $84 million as of
December 31, 2010.
Credit Agreement
In November 2011, we amended and restated our 3-year $1.0 billion unsecured revolving credit agreement
which was set to expire in December 2013 and replaced it with a 5-year $1.0 billion unsecured revolving
agreement expiring November 2016. Under the new credit agreement, at our option, we can borrow on either a
competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR
plus a spread or the base rate plus a spread. The LIBOR spread, currently 120 basis points, varies depending on
our credit ratings ranging from 87.5 to 147.5 basis points. We also pay an annual facility fee regardless of
utilization. This facility fee, currently 17.5 basis points, may fluctuate between 12.5 and 27.5 basis points,
depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at
market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our
option.
The terms of the new credit agreement include standard provisions related to conditions of borrowing,
including a customary material adverse effect clause which could limit our ability to borrow additional funds. In
addition, the new credit agreement contains customary restrictive and financial covenants as well as customary
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