Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
On August 26, 2005, Golden Gate Captive Insurance Company (“Golden Gate”), a special purpose financial captive insurance company wholly-owned by Protective Life Insurance Company (the “Company”), issued $100 million in aggregate principal amount of floating rate surplus notes due August 15, 2037 (the “Notes”) under a surplus notes facility established with certain purchasers (the “Facility”) through which Golden Gate may issue up to an aggregate of $400 million of surplus notes. The Notes are direct financial obligations of Golden Gate and are not guaranteed by the Company or its parent company, Protective Life Corporation (“Protective”).
The Notes were issued by Golden Gate to fund statutory reserves required by the Valuation of Life Insurance Policies Regulation (Regulation XXX). Golden Gate has entered into agreements to reinsure certain term life insurance policies having guaranteed level premiums on a 100% coinsurance basis from the Company and two of its subsidiaries, Empire General Assurance Corporation (“Empire General”) and West Coast Life Insurance Company (“West Coast Life”). Lehman Brothers Holdings, Inc. will serve as committed purchaser under the surplus notes facility. Under the terms of the Notes, the holders of the Notes cannot require repayment from the Company or any of its subsidiaries, other than Golden Gate, the direct issuer of the Notes. The Company, Empire General and West Coast Life have each agreed to indemnify Golden Gate for certain costs and the Company has agreed to be jointly and severally liable with Golden Gate as to certain of its obligations (which obligations should not include payment of principal and interest on the Notes). In addition, Protective has entered into certain support agreements with Golden Gate obligating Protective to pay or make capital contributions to Golden Gate, or otherwise provide support, in respect of certain of Golden Gate’s expenses and in certain circumstances to collateralize certain of the Company’s obligations to Golden Gate.
The annual interest rate on the Notes will equal the one-month London Interbank Offered Rate (LIBOR), plus a spread. Such interest will be paid monthly in arrears on the 26th of each month. Any payment of principal of, including by redemption, or interest on the Notes may only be made with the prior approval of the Director of Insurance of the State of South Carolina in accordance with the terms of its licensing order and in accordance with applicable law. If an event of default occurs, the holders of the Notes have the right to declare the entire principal thereof and interest accrued thereon to be due and payable immediately, subject to regulatory approval. Golden Gate reserves the right to repay the Notes at any time, subject to prior regulatory approval.
Additional information regarding this transaction is set forth in Protective's press release which is filed as Exhibit 99.1 hereto.
Item 9.01 | Financial Statements and Exhibits. |
| | 99.1 - Press Release Dated August 30, 2005 |
SIGNATURES
