8. DEBT

The following table sets forth detail of the Company’s debt and interest expense:


										Interest Expense
	Principal Amount							Three Months Ended				Nine Months Ended
	at		Maturity		Interest			September 30,				September 30,
	September 30, 2011		Date		Rate(a)			2011		2010		2011		2010
2006 credit agreement:
Term loan	$	362,500		2012		1.246	%	$	1,159	$	2,540	$	4,830	$	8,571
$75 Million revolver (non-use fee)		—		(b)		—			—		70		50		210
Grapevine Note		72,350		2021		6.712	%		1,226		1,220		3,638		3,632
Trust preferred securities:
UICI Capital Trust I		15,470		2034		3.786	%		149		154		444		450
HealthMarkets Capital Trust I		51,550		2036		3.397	%		436		467		1,305		1,330
HealthMarkets Capital Trust II		51,550		2036		3.397	%		436		1,102		2,496		3,271
Other:
Interest on Deferred Tax Gain		—				3.500	%		514		536		1,566		1,591
Amortization of financing fees		—							825		1,286		2,961		3,780

Total	$	553,420						$	4,745	$	7,375	$	17,290	$	22,835
Student Loan Credit Facility		61,750		(c)		0.000%	(d)		—		—		—		—

Total	$	615,170						$	4,745	$	7,375	$	17,290	$	22,835


(a)		Represents the interest rate at September 30, 2011.

(b)		The $75 million revolver matured on April 5, 2011 and was not renewed.

(c)		The Series 2001A-1 Notes and Series 2001A-2 Notes have a final stated maturity of July 1, 2036; the Series 2002A Notes have a final stated maturity of July 1, 2037 (see “Student Loan Credit Facility” discussion below).

(d)		The interest rate on each series of SPE Notes resets monthly in a Dutch auction process and is capped by several interest rate triggers. It is currently capped at zero by a Net Loan Rate calculation driven by the rate of return of the student loans less certain allowed note fees.

On April 5, 2006, HealthMarkets, LLC entered into a credit agreement, providing for a $500.0 million term loan facility and a $75.0 million revolving credit facility, which includes a $35.0 million letter of credit sub-facility. The full amount of the term loan was drawn at closing. At September 30, 2011, the Company had an aggregate of $362.5 million of indebtedness outstanding under the term loan facility, which indebtedness bore interest at the London inter-bank offered rate (“LIBOR”) plus a borrowing margin of 1.00%. The indebtedness outstanding of $362.5 million is due in full upon the maturity of the term loan on April 5, 2012. The Company expects to have the necessary capital to repay the term loan in full at maturity. Pursuant to the credit agreement, the $75.0 million revolving credit facility matured on April 5, 2011 and was not renewed.

In addition, on April 5, 2006, HealthMarkets Capital Trust I and HealthMarkets Capital Trust II (two Delaware statutory business trusts, collectively the “Trusts”) issued $100.0 million of floating rate trust preferred securities (the “Trust Securities”) and $3.1 million of floating rate common securities. The Trusts invested the proceeds from the sale of the Trust Securities, together with the proceeds from the issuance to HealthMarkets, LLC by the Trusts of the common securities, in $100.0 million principal amount of HealthMarkets, LLC’s Floating Rate Junior Subordinated Notes due June 15, 2036 (the “Notes”), of which $50.0 million principal amount accrue interest at a floating rate equal to three-month LIBOR plus 3.05% and $50.0 million principal amount accrue interest at a fixed rate of 8.367% until June 15, 2011 when the principal amount began to accrue interest at a floating rate equal to three-month LIBOR plus 3.05%

On April 29, 2004, UICI Capital Trust I (a Delaware statutory business trust, the “2004 Trust”) completed the private placement of $15.0 million aggregate issuance amount of floating rate trust preferred securities with an aggregate liquidation value of $15.0 million (the “2004 Trust Preferred Securities”). The 2004 Trust invested the $15.0 million proceeds from the sale of the 2004 Trust Preferred Securities, together with the proceeds from the issuance to the Company by the 2004 Trust of its floating rate common securities in the amount of $470,000 (the “Common Securities” and, collectively with the 2004 Trust Preferred Securities, the “2004 Trust Securities”), in an equivalent face amount of the Company’s Floating Rate Junior Subordinated Notes due 2034 (the “2004 Notes”). The 2004 Notes will mature on April 29, 2034. The 2004 Notes accrue interest at a floating rate equal to three-month LIBOR plus 3.50%, payable quarterly.

On August 16, 2006, Grapevine issued $72.4 million of its senior secured notes (the “Grapevine Notes”) to an institutional purchaser. The net proceeds from the Grapevine Notes of $71.9 million were distributed to HealthMarkets, LLC. The Grapevine Notes bear interest at an annual rate of 6.712%. The interest is to be paid semi-annually on January 15^th and July 15^th of each year beginning on January 15, 2007. The principal payment is due at maturity on July 15, 2021. The Grapevine Notes are collateralized by Grapevine’s assets including a note receivable in the amount of $78.4 million from a unit of CIGNA Corporation (“the CIGNA Note”). Grapevine services its debt primarily from cash receipts from the CIGNA Note. All cash receipts from the CIGNA Note are paid into a debt service coverage account maintained and held by an institutional trustee (the “Grapevine Trustee”) for the benefit of the holder of the Grapevine Notes. Pursuant to an indenture and direction notices from Grapevine, the Grapevine Trustee uses the proceeds in the debt service coverage account to (i) make interest payments on the Grapevine Notes, (ii) pay for certain Grapevine expenses and (iii) distribute cash to HealthMarkets, subject to satisfaction of certain restricted payment tests.

The fair value of the Company’s debt, exclusive of indebtedness outstanding under the secured student loan credit facility, was $491.3 million and $499.2 million at September 30, 2011 and December 31, 2010, respectively. The fair value of such debt is estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Student Loan Credit Facility

At September 30, 2011 and December 31, 2010, the Company had an aggregate of $61.8 million and $68.7 million, respectively, of indebtedness outstanding under a secured student loan credit facility (the “Student Loan Credit Facility”), which indebtedness is represented by Student Loan Asset-Backed Notes issued by a bankruptcy-remote special purpose entity (the “SPE Notes”). At September 30, 2011 and December 31, 2010, indebtedness outstanding under the Student Loan Credit Facility was secured by student loans and accrued interest in the carrying amount of $53.1 million and $60.5 million, respectively, and by a pledge of cash, cash equivalents and other qualified investments of $8.7 million and $8.0 million, respectively.

The SPE Notes represent obligations solely of the SPE, and not of the Company or any other subsidiary of the Company. For financial reporting and accounting purposes, the Student Loan Credit Facility has been classified as a financing as opposed to a sale. Accordingly, in connection with the financing, the Company recorded no gain on sale of the assets transferred to the SPE.

The SPE Notes were issued by the SPE in three tranches: $50.0 million of Series 2001A-1 Notes (the “Series 2001A -1 Notes”) and $50.0 million of Series 2001A-2 Notes (the “Series 2001A-2 Notes”), both issued on April 27, 2001, and $50.0 million of Series 2002A Notes (the “Series 2002A Notes”) issued on April 10, 2002. The interest rate on each series of SPE Notes resets monthly in a Dutch auction process. The Series 2001A-1 Notes and Series 2001A-2 Notes have a final stated maturity of July 1, 2036; the Series 2002A Notes have a final stated maturity of July 1, 2037. Beginning in 2005, the SPE Notes were also subject to mandatory redemption in whole or in part on each interest payment date from any monies received as a recovery of the principal amount of any student loan securing payment of the SPE Notes, including scheduled, delinquent and advance payments, payouts or prepayments. During the three and nine months ended September 30, 2011, respectively, the Company made principal payments of approximately $2.3 million and $6.9 million on the SPE notes.

At September 30, 2011 and December 31, 2010, the carrying amount of outstanding indebtedness secured by student loans approximated the fair value, as interest rates on such indebtedness reset monthly.