Debt

9 Months Ended

Sep. 30, 2012

Debt

Debt

NOTE 6. Debt

OneBeacon’s debt outstanding as of September 30, 2012 and December 31, 2011 consisted of the following:

	September 30, 2012			December 31, 2011
	($ in millions)
Senior unsecured notes, at face value	$	269.9		$	269.9
Unamortized original issue discount	(0.1		)	(0.2		)
Senior unsecured notes, carrying value	$	269.8		$	269.7

Senior Notes

In May 2003, OBH issued $700.0 million face value of senior unsecured debt through a public offering, at an issue price of 99.7% (the “Senior Notes”) and received $693.4 million of proceeds. The Senior Notes bear an annual interest rate of 5.875%, payable semi-annually in arrears on May 15 and November 15, until maturity on May 15, 2013, and are fully and unconditionally guaranteed as to the payment of principal and interest by White Mountains. Refer to “Note 15. Related Party Disclosures” of the Company’s 2011 Annual Report on Form 10-K. OBH incurred $7.3 million in expenses related to the issuance of the Senior Notes (including the $4.5 million underwriting discount), which have been deferred and are being recognized into interest expense over the life of the Senior Notes. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the Senior Notes have an effective yield to maturity of approximately 6.0% per annum. At September 30, 2012, OBH was in compliance with all of the covenants under the Senior Notes. The Company plans to refinance its Senior Notes prior to their current maturity on May 15, 2013.

On March 24, 2011, OBH commenced a cash tender offer for up to $150.0 million in aggregate principal amount of the Senior Notes, which expired on April 20, 2011. Payment for the Senior Notes included accrued and unpaid interest up to the settlement date. OBH accepted and retired $150.0 million aggregate principal amount of the Senior Notes for $161.6 million, which resulted in a $12.0 million pre-tax loss, including transaction fees.