8-KMaterial AgreementsExhibits & Filings

TRAVELERS COMPANIES, INC. 8-K Report, Material Agreement (Apr 12, 2005)

Filed April 12, 2005For Securities:TRV

Summary

This Form 8-K filing by The St. Paul Travelers Companies, Inc. on April 12, 2005, details significant transactions related to the Company's equity stake in Nuveen Investments, Inc. The core of the report outlines a secondary offering of Nuveen shares, where the Company entered into an underwriting agreement to sell a substantial portion of its holdings. Concurrently, the Company engaged in forward sale agreements with affiliates of Merrill Lynch and Morgan Stanley, receiving substantial upfront payments for future delivery of Nuveen shares. These agreements provide flexibility for cash settlement and involve pledging Nuveen Class B common stock as collateral. The filing also includes indemnity agreements related to the issuance of debt securities mandatorily exchangeable for Nuveen shares by Merrill Lynch and Morgan Stanley. These transactions signal a strategic move by St. Paul Travelers to monetize its investment in Nuveen, securing significant capital while managing the future delivery of shares through complex financial instruments. Investors should note the financial implications of the upfront payments, the discounts applied in the forward sale agreements, and the potential impact on the Company's future balance sheet and earnings, depending on the ultimate settlement method of the forward sale agreements. The involvement of major financial institutions like Merrill Lynch and Morgan Stanley underscores the scale and importance of these transactions.

Key Highlights

  • 1The St. Paul Travelers Companies, Inc. entered into material definitive agreements on April 6, 2005, related to its equity stake in Nuveen Investments, Inc.
  • 2The Company participated in a secondary offering, selling 39,309,155 shares of Nuveen Class A common stock.
  • 3Forward sale agreements were executed with Merrill Lynch International and Morgan Stanley & Co. International Limited, involving 5,824,800 and 6,067,500 Nuveen Class A shares respectively.
  • 4The Company received aggregate upfront payments of $184,290,200 and $192,542,000 under the forward sale agreements.
  • 5These forward sale agreements include the right for the Company to cash settle and involve the pledging of Nuveen Class B common stock as collateral.
  • 6The settlement dates for the forward sale agreements are no later than March 31, 2006, with potential for acceleration by the Company.
  • 7Indemnity agreements were entered into to cover liabilities related to the issuance of mandatorily exchangeable debt securities by Merrill Lynch and Morgan Stanley.

Frequently Asked Questions

The primary purpose of this filing is to report on the entry into material definitive agreements related to the Company's equity stake in Nuveen Investments, Inc. This includes the details of a secondary stock offering and complex forward sale agreements with major financial institutions.

The forward sale agreements provide the Company with immediate cash proceeds ($184,290,200 from Merrill Lynch and $192,542,000 from Morgan Stanley) for the future delivery of Nuveen shares. However, these agreements are structured with discounts from the public offering price and involve the potential for cash settlement, which could impact future earnings and cash flow depending on the settlement method and market conditions at the time of settlement.

The Nuveen Class B common stock is pledged by The St. Paul Travelers Companies to the counterparties of the forward sale agreements (Merrill Lynch and Morgan Stanley affiliates) as collateral to secure the Company's obligation to deliver Nuveen Class A shares or cash upon settlement. The Company retains the right to vote these pledged shares until settlement.

The 'Mandatorily Exchangeable Securities' are debt instruments issued by Merrill Lynch & Co., Inc. and Morgan Stanley. These securities are designed to be mandatorily exchanged for Nuveen Class A common stock (or its cash equivalent) at a future date. The St. Paul Travelers Companies entered into indemnity agreements and made payments related to the underwriting of these securities.