Humana 2012 Annual Report Download - page 121

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. DEBT
The carrying value of long-term debt outstanding was as follows at December 31, 2012 and 2011:
2012 2011
(in millions)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016 ............... $ 523 $ 530
$500 million, 7.20% due June 15, 2018 .............. 506 507
$300 million, 6.30% due August 1, 2018 ............. 317 319
$600 million, 3.15% due December 1, 2022 ........... 598 0
$250 million, 8.15% due June 15, 2038 .............. 267 267
$400 million, 4.625% due December 1, 2042 .......... 400 0
Total senior notes ........................... 2,611 1,623
Other long-term borrowings ....................... 0 36
Total long-term debt ......................... $2,611 $1,659
Senior Notes
In December 2012, we issued $600 million of 3.15% senior notes due December 1, 2022 and $400 million
of 4.625% senior notes due December 1, 2042. Our net proceeds, reduced for the discount and cost of the
offering, were $990 million. We used the proceeds from the offering primarily to finance the acquisition of
Metropolitan, including the retirement of Metropolitan’s indebtedness, and to pay related fees and expenses.
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).
In addition, our 7.20%, 8.15%, 3.15%, and 4.625% senior notes 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. The unamortized carrying value adjustment was $64 million as of
December 31, 2012 and $74 million as of December 31, 2011.
Credit Agreement
Our 5-year $1.0 billion unsecured revolving agreement expires in November 2016. Under the 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.
111