Debt and Standby Letter of Credit Facilities

White Mountains’s debt outstanding as of December 31, 2014 and 2013 consisted of the following:



	December 31,
Millions	2014			2013
OBH Senior Notes, at face value	$	275.0		$	275.0
Unamortized original issue discount	(.3		)	(.3		)
OBH Senior Notes, carrying value	274.7			274.7
SIG Senior Notes, at face value	400.0			400.0
Unamortized original issue discount	(.3		)	(.4		)
SIG Senior Notes, carrying value	399.7			399.6
WTM Bank Facility	—			—
Tranzact Bank Facility	68.7			—
Unamortized issuance cost	(1.3		)	—
Tranzact Bank Facility, carrying value	67.4			—
Other debt	4.8			2.1
Total debt	$	746.6		$	676.4

A schedule of contractual repayments of White Mountains’s debt as of December 31, 2014, follows:



Millions	December 31, 2014
Due in one year or less	$	6.0
Due in two to three years	424.6
Due in four to five years	42.9
Due after five years	275.0
Total	$	748.5

OBH Senior Notes

In November 2012, OneBeacon U.S. Holdings, Inc. (“OBH”), an intermediate holding company of OneBeacon, issued $275.0 million face value of senior unsecured notes (“OBH Senior Notes”) through a public offering, at an issue price of 99.9% and received $272.9 million of proceeds. The OBH Senior Notes bear an annual interest rate of 4.6% payable semi-annually in arrears on May 9 and November 9, until maturity on November 9, 2022, and are fully and unconditionally guaranteed as to the payment of principal and interest by OneBeacon Ltd. OBH incurred $2.8 million in expenses related to the issuance of the OBH Senior Notes (including $1.8 million in underwriting fees), which have been deferred and are being recognized as interest expense over the life of the OBH Senior Notes. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the OBH Senior Notes have an effective yield to maturity of approximately 4.7% per annum.

In December 2012, the proceeds from the OBH Senior Notes were utilized to repurchase the remaining $269.8 million of outstanding senior notes issued in 2003 by OBH with an annual interest rate of 5.875% for $275.9 million. The repurchase resulted in a $6.3 million loss, including transaction fees and the write-off of the remaining $0.2 million in unamortized deferred costs and original issue discount at the time of repurchase.

OBH recorded $13.0 million, $13.0 million and $16.9 million in interest expense on the OBH Senior Notes for the years ended December 31, 2014, 2013 and 2012.

SIG Senior Notes

In March 2007, Sirius International Group, Ltd. (“SIG”), an intermediate holding company of Sirius Group, issued $400.0 million face value of senior unsecured notes (“SIG Senior Notes”) at an issue price of 99.715% for net proceeds of $392.0 million after taking into effect both deferrable and non-deferrable issuance costs, including the interest rate lock agreement described below. The SIG Senior Notes were issued in an offering that was exempt from the registration requirements of the Securities Act of 1933. The SIG Senior Notes bear an annual interest rate of 6.375%, payable semi-annually in arrears on March 20 and September 20, until maturity in March 2017.

SIG incurred $3.6 million in expenses related to the issuance of the SIG Senior Notes (including $2.6 million in underwriting fees), which have been deferred and are being recognized into interest expense over the life of the SIG Senior Notes.

In anticipation of the issuance of the SIG Senior Notes, SIG entered into an interest rate lock agreement to hedge its interest rate exposure from the date of the agreement until the pricing of the SIG Senior Notes. The agreement was terminated on March 15, 2007 with a loss of $2.4 million, which was recorded in other comprehensive income. The loss is being reclassified from accumulated other comprehensive income over the life of the SIG Senior Notes using the interest method and is included in interest expense. As of December 31, 2014, the unamortized balance of the loss remaining in accumulated other comprehensive income was $1.0 million.

Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, including the interest rate lock agreement, the SIG Senior Notes yield an effective rate of approximately 6.5% per annum. White Mountains recorded $26.2 million of interest expense, inclusive of amortization of issuance costs and the interest rate lock agreement, on the SIG Senior Notes for each of the years ended December 31, 2014, 2013 and 2012.

WTM Bank Facility

On August 14, 2013, White Mountains entered into a revolving credit facility with a syndicate of lenders administered by Wells Fargo Bank, N.A. which has a total commitment of $425.0 million (the “WTM Bank Facility”) and has a maturity date of August 14, 2018 (the “WTM Bank Facility”). The WTM Bank Facility replaced White Mountains’s previous revolving credit facility administered by Bank of America, N.A. which had a total commitment of $375.0 million (the “Previous WTM Bank Facility”). During 2014, White Mountains borrowed and repaid a total of $65.0 million under the WTM Bank Facility at a blended interest rate of 3.65%. During 2013, White Mountains borrowed and repaid a total of $50.0 million under the WTM Bank Facility at a blended interest rate of 3.65%. As of December 31, 2014, the WTM Bank Facility was undrawn. White Mountains recorded $0.3 million of interest expense on the WTM Bank Facility for both the years ended December 31, 2014 and 2013.

During 2013, White Mountains also borrowed $150.0 million and repaid a total of $225.0 million under the Previous WTM Bank Facility at a blended interest rate of 2.83%. In December 2012, White Mountains borrowed $150.0 million under the Previous WTM Bank Facility at a blended interest rate of 3.53%. White Mountains repaid $75.0 million in December 2012 and the remaining balance in January 2013. White Mountains recorded $2.9 million and $1.7 million of interest expense on the Previous WTM Bank Facility for the years ended December 31, 2013 and 2012.

The WTM Bank Facility contains various affirmative, negative and financial covenants that White Mountains considers to be customary for such borrowings, including certain minimum net worth and maximum debt to capitalization standards. These covenants can restrict White Mountains in several ways, including its ability to incur additional indebtedness.

Tranzact Bank Facility

On October 10, 2014, Tranzact entered into a secured credit facility with a syndicate of lenders administered by The PrivateBank and Trust Company (the “Tranzact Bank Facility”). The term of the credit facility ends on October 10, 2019. The Tranzact Bank Facility consists of a $70.0 million term loan facility, which was fully drawn at closing and had an outstanding balance of $68.7 million as of December 31, 2014, and a revolving credit facility for an additional $4.5 million, which was undrawn as of December 31, 2014. The Tranzact Bank Facility is secured by intellectual property and the common stock of Tranzact and its subsidiaries. White Mountains recorded $0.7 million of interest expense on the Tranzact Bank Facility for the year ended December 31, 2014. The Tranzact Bank Facility carries a variable interest rate, at a margin over the U.S. dollar LIBOR rate. The margin over LIBOR may vary between 2.5% to 4.5%. At December 31, 2014 the variable interest rate on the debt was 4.15575%, including a margin over LIBOR of 2.5%. On October 10, 2014, Tranzact entered into an interest rate swap agreement to effectively fix the rate it pays on the $70.0 million term loan portion of the facility (see Note 9 for details).

The Tranzact Bank Facility contains various affirmative, negative and financial covenants which White Mountains considers to be customary for such borrowings, including a minimum fixed charge coverage ratio and a minimum leverage ratio. Failure to meet one or more of these covenants could result in an event of default, which ultimately could eliminate availability under these facilities and result in acceleration of principal repayment on any amounts outstanding.

Stand By Letter of Credit Facilities

On November 25, 2014, Sirius International entered into two stand by letter of credit facility agreements totaling $200.0 million to provide capital support for its Lloyds Syndicate 1945. One letter of credit is a $125.0 million facility from Nordea Bank Finland plc (the “Nordea facility”), $100.0 million of which is issued on an unsecured basis. The second letter of credit is a $75.0 million facility with Lloyds Bank plc (the “Lloyds Bank facility”), $25.0 million of which is issued on an unsecured basis. The Nordea facility and the Lloyds Bank facility are renewable annually.

The unsecured portions of the Nordea facility and the Lloyds Bank facility are subject to various affirmative, negative and financial covenants that White Mountains considers to be customary for such borrowings, including certain minimum net worth and maximum debt to capitalization standards.

Sirius International has other secured letter of credit and trust arrangements with various financial institutions to support its insurance operations.

Debt and Standby Letter of Credit Facility Covenants

As of December 31, 2014, White Mountains was in compliance with all of the covenants under the WTM Bank Facility, the OBH Senior Notes, the SIG Senior Notes, the Tranzact Bank Facility, the Nordea facility and the Lloyd’s Bank Facility.

Interest

Total interest expense incurred by White Mountains for its indebtedness was $41.9 million, $42.5 million and $44.8 million in 2014, 2013 and 2012. Total interest paid by White Mountains for its indebtedness was $42.0 million, $42.6 million, and $44.6 million in 2014, 2013 and 2012.