UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 2005 (November 9, 2005)
STATE AUTO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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| Ohio
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0-19289
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31-1324304 |
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| (State or other jurisdiction
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(Commission
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(IRS Employer |
| of incorporation)
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File Number)
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Identification No.) |
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| 518 East Broad Street, Columbus, Ohio
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43215-3976 |
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| (Address of principal executive offices)
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(Zip Code) |
Registrant’s telephone number, including area code: (614) 464-5000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Section 1. Registrant’s Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On November 9, 2005, State Auto Financial Corporation (the “Company” or “State Auto Financial”), as
borrower, entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of financial
institutions, as lenders, and KeyBank National Association, as Administrative Agent, Lead Arranger,
Sole Book Runner and Swingline Lender. The Credit Agreement provides for a $100.0 million
five-year unsecured revolving credit facility (the “Credit Facility”). During the term of the
Credit Facility, the Company has the right to increase the total facility amount by $25.0 million,
up to a maximum total facility amount of $125.0 million, provided that no event of default has
occurred and is continuing. The Credit Facility is available for general corporate purposes,
including working capital and acquisitions, and for catastrophic loss purposes. At the present
time, the Company intends to use the Credit Facility for catastrophe loss purposes. The Credit
Facility provides for interest-only payments during its term, with principal due in full at
maturity. Interest is based on either a London interbank market rate or a base rate plus a
calculated margin amount. The Credit Facility replaced the Company’s structured contingent
financing arrangement which expired on November 9, 2005. See Item 1.02 below. The Credit facility
provides the Company with greater flexibility than the structured contingent financing arrangement.
The Credit Agreement contains certain covenants, including financial covenants that require the
Company to (i) maintain a minimum net worth, (ii) not exceed a certain debt to capitalization ratio
and (iii) not go below a certain fixed charge coverage ratio. As of November 9, 2005, the Company
was in compliance with all of the covenants in the Credit Agreement.
Item 1.02 Termination of a Material Definitive Agreement.
On November 9, 2005, the Credit Agreement dated November 12, 2003 (the “Old Credit Agreement”),
among SAF Funding Corporation, KeyBank National Association, as Administrative Agent, Lead Arranger
and Sole Book Runner, and a syndicate of financial institutions,
as lenders (the “Lenders”), expired in
accordance with its terms. The Old Credit Agreement and other related agreement were part of a
structured contingent financing arrangement which provided State Auto Financial with up to $100.0
million of funding for reinsurance purposes if the State Auto Group were to incur catastrophe
losses in excess of $120.0 million.
In the event of an applicable catastrophic loss, this structured contingent financing arrangement
provided that State Auto Financial would sell redeemable preferred shares to SAF Funding
Corporation, a special purpose company (“SPC”), which would borrow the money necessary for such
purchase from the Lenders. State Auto Financial would then contribute to State Auto Property and
Casualty Insurance Company (“State Auto P&C”) the funds received from the sale of its preferred
shares, thereby preserving the statutory surplus of State Auto P&C. State Auto P&C would use the
contributed capital to pay its direct catastrophe losses and losses assumed under the intercompany
catastrophe reinsurance agreement. State Auto Financial was obligated to repay
SPC (which would repay the Lenders) by redeeming the preferred shares in ten semiannual
installments. In the event of a default by State Auto Financial, the obligation to repay SPC was
secured by a Put Agreement among State Auto Financial, State Automobile Mutual Insurance Company
(“State Auto Mutual”) and the Lenders, under which State Auto Mutual would be obligated to either
purchase the preferred shares from SPC or repay SPC for the loan(s) outstanding.
Section 2
— Financial Information
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| Item 2.03 |
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Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant. |
Information concerning the Company’s new Credit Agreement is set forth in Item 1.01, which
information is incorporated herein by reference.
Section 9 — Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
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| Exhibit No. |
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Description |
10.1
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Credit Agreement dated as of November 9, 2005, among State
Auto Financial Corporation, as borrower, a syndicate of
financial institutions, as lenders, and KeyBank National
Association, as Administrative Agent, Lead Arranger, Sole Book
Runner and Swingline Lender. |