9. Capital Structure

Debt

On January 10, 2013, the Company issued $500 million of 5.10% Fixed-to-Floating Rate Subordinated Debentures due 2053. The proceeds of this issuance were used for general corporate purposes, including the repurchase of the Company’s common stock through open market purchases and through an accelerated repurchase program.

On June 7, 2013, the Company issued $500 million of 3.15% Senior Notes due 2023 and $500 million of 4.50% Senior Notes due 2043. The proceeds of this issuance were used to fund the repurchase of debt and for general corporate purposes.

On June 20, 2013, the Company repurchased principal amounts of $1.83 billion of debt. The Company recognized a loss on extinguishment of $480 million, pre-tax, representing the excess of the repurchase price over the principal repaid, the write-off of the unamortized debt issuance costs and other costs related to the repurchase transaction.

As of June 30, 2013, the Company has $500 million of commercial paper outstanding with a weighted average interest rate of 0.32%.

Total debt outstanding is presented in the following table.

($ in millions)		June 30, 2013		December 31, 2012
7.50% Debentures, due 2013	$	--	$	250
5.00% Senior Notes, due 2014 (1)		650		650
6.20% Senior Notes, due 2014 (1)		300		300
6.75% Senior Debentures, due 2018		177		250
7.45% Senior Notes, due 2019 (1)		325		700
3.15% Senior Notes, due 2023(1)		500		--
6.125% Senior Notes, due 2032 (1)		160		250
5.35% Senior Notes due 2033 (1)		323		400
5.55% Senior Notes due 2035 (1)		563		800
5.95% Senior Notes, due 2036 (1)		405		650
6.90% Senior Debentures, due 2038		165		250
5.20% Senior Notes, due 2042 (1)		88		500
4.50% Senior Notes, due 2043(1)		500		--
5.10% Subordinated Debentures, due 2053		500		--
6.125% Junior Subordinated Debentures, due 2067		263		500
6.50% Junior Subordinated Debentures, due 2067		500		500
Synthetic lease VIE obligations, floating rates, due 2014		44		44
Federal Home Loan Bank (“FHLB”) advances, due 2018		12		13
Total long-term debt		5,475		6,057
Short-term debt (2)		500		--
Total debt	$	5,975	$	6,057


(1)	Senior Notes are subject to redemption at the Company’s option in whole or in part at any time at the greater of either 100% of the principal amount plus accrued and unpaid interest to the redemption date or the discounted sum of the present values of the remaining scheduled payments of principal and interest and accrued and unpaid interest to the redemption date.
(2)	The Company classifies any borrowings which have a maturity of twelve months or less at inception as short-term debt.

Preferred stock

On June 12, 2013, the Company issued 11,500 shares of 5.625% Noncumulative Perpetual Preferred Stock, Series A, with a $1.00 par value per share and a liquidation preference of $25,000 per share, for aggregate proceeds of $287.5 million. The proceeds of this issuance were used to fund the repurchase of debt and for general corporate purposes.

The preferred stock ranks senior to the Company’s common stock with respect to the payment of dividends and liquidation rights. The Company will pay dividends on the preferred stock on a noncumulative basis only when, as and if declared by the Company’s board of directors (or a duly authorized committee of the board) and to the extent that the Company has legally available funds to pay dividends. If dividends are declared on the preferred stock, they will be payable quarterly in arrears at an annual fixed rate of 5.625%. Dividends on the preferred stock are not cumulative. Accordingly, in the event dividends are not declared on the preferred stock for payment on any dividend payment date, then those dividends will cease to be payable. If the Company has not declared a dividend before the dividend payment date for any dividend period, the Company has no obligation to pay dividends for that dividend period, whether or not dividends are declared for any future dividend period. No dividends may be paid or declared on the Company’s common stock and no shares of the Company’s common stock may be repurchased unless the full dividends for the latest completed dividend period on the preferred stock have been declared and paid or provided for.

If the Company fails to meet specified capital adequacy, net income or shareholders’ equity levels, the declaration of dividends on the preferred stock is prohibited, except out of the net proceeds of common stock issued during the 90 days prior to the date of declaration.

The preferred stock does not have voting rights except with respect to certain changes in the terms of the preferred stock, in the case of certain dividend nonpayments, certain other fundamental corporate events, mergers or consolidations and as otherwise provided by law. If and when dividends have not been declared and paid in full for at least six quarterly dividend periods or their equivalent (whether or not consecutive), the authorized number of directors then constituting our board of directors will be increased by two. The holders of the preferred stock, together with the holders of all other affected classes and series of voting parity stock, voting as a single class, will be entitled to elect the two additional members of the board of directors of the Company, subject to certain conditions. The board of directors shall at no time have more than two preferred stock directors.

The preferred stock is perpetual and has no maturity date. The preferred stock is redeemable at the Company’s option in whole or in part, on or after June 15, 2018, at a redemption price of $25,000 per share of preferred stock, plus declared and unpaid dividends. Prior to June 15, 2018, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of certain rating agency events at a redemption price equal to $25,000 per share or, if greater, a make-whole redemption price, plus declared and unpaid dividends.