Notes Payable and Debt and Financing Arrangements

As of September 30, 2015, the Company's financing structure, which includes senior and subordinated notes, and bank and loan facilities available from a variety of sources, including commercial banks, is as follows:



(U.S. dollars in thousands)	September 30, 2015				December 31, 2014
	Commitment/ Debt (1)		In Use/ Outstanding (2)		Commitment/ Debt (1)		In Use/ Outstanding (2)
Debt:
2.30% Senior Notes due 2018	300,000		297,847		300,000		297,344
5.75% Senior Notes due 2021	400,000		397,415		400,000		397,092
6.375% Senior Notes due 2024	350,000		349,002		350,000		348,920
4.45% Subordinated Notes due 2025	500,000		492,318		—		—
6.25% Senior Notes due 2027	325,000		323,179		325,000		323,062
Variable Rate Note, face amount €7m, due 2035	7,823		7,336		—		—
Variable Rate Note, face amount $27m, due 2036	27,000		25,280		—		—
Variable Rate Note, face amount $31m, due 2036	31,300		29,305		—		—
Variable Rate Note, face amount $10m, due 2036	9,800		9,175		—		—
Variable Rate Note, face amount €11m, due 2036	12,294		11,528		—		—
5.25% Senior Notes due 2043	300,000		296,261		300,000		296,162
5.5% Subordinated Notes due 2045	500,000		488,271		—		—
Total debt carrying value	$	2,763,217	$	2,726,917	$	1,675,000	$	1,662,580

_______________

(1)

Excluded from the table are revolving credit facilities of $1.5 billion and $1.6 billion as of September 30, 2015 and December 31, 2014, respectively. As of September 30, 2015 and December 31, 2014, $455.9 million and $606.1 million, respectively, were utilized under these facilities to issue letters of credit, leaving $1.0 billion and $968.9 million, respectively, available for use under the revolving credit facilities.

(2) "In Use/Outstanding" data represent September 30, 2015 and December 31, 2014 accreted values.

(a) Notes Payable and Debt

With the exception of the debt acquired as part of the Catlin Acquisition, as described below, all outstanding debt of the Company as of September 30, 2015 and December 31, 2014 was issued by XL-Cayman, a 100% owned subsidiary of XL-Ireland. XL-Ireland does not have significant assets or operations independent of XL-Cayman. XL-Cayman's outstanding debt is fully and unconditionally guaranteed by XL-Ireland. The ability of XL-Cayman, like that of the Company, to obtain funds from its subsidiaries to satisfy any of its obligations, including under guarantees, is subject to certain contractual restrictions, applicable laws and statutory requirements of the various countries in which the subsidiaries operate, including, among others, Bermuda, the United States, Ireland, Switzerland and the United Kingdom. For details of the required statutory capital and surplus for the principal operating subsidiaries of the Company, see Item 8, Note 25, "Statutory Financial Data," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

On March 30, 2015, XL-Cayman issued $500 million of subordinated notes due March 2025, with a fixed coupon of 4.45%, that are guaranteed by XL-Ireland. The notes are listed on the New York Stock Exchange. The notes were issued at 99.633% of the face amount and net proceeds were $492.2 million. Related expenses of the offering amounted to approximately $5.9 million. These costs were deferred and will be amortized over the term of the subordinated notes.

On March 30, 2015, XL-Cayman issued $500 million of subordinated notes due March 2045, with a fixed coupon of 5.5%, that are guaranteed by XL-Ireland. The notes are listed on the New York Stock Exchange. The notes were issued at 99.115% of the face amount and net proceeds were $488.4 million. Related expenses of the offering amounted to approximately $7.2 million. These costs were deferred and will be amortized over the term of the subordinated notes.

As a result of the Catlin Acquisition, the Company assumed the following liabilities of Catlin:

•

Variable rate unsecured subordinated notes in the amounts of €7 million and $27 million due March 2035 and March 2036, respectively, issued by Catlin Underwriting (formerly Wellington Underwriting plc) in May 2006. The notes are subordinated to the claims of all senior creditors, as defined in the agreement governing the notes. The notes pay interest at a floating rate based on the rate on three-month deposits in U.S. dollars plus a margin of 295 basis points and 317 basis points, respectively. Interest is payable quarterly in arrears. The notes are redeemable at the discretion of the issuer.

•

Variable rate unsecured subordinated notes in the amounts of $31 million, $10 million and €11 million due September 2036, issued by Catlin Underwriting, in July 2006. The notes are subordinated to the claims of all senior creditors, as defined in the agreement governing the notes. The notes pay interest at a floating rate based on the rate on three-month deposits in U.S. dollars plus a margin of 310 basis points, 300 basis points and 300 basis points, respectively. Interest is payable quarterly in arrears. The notes are redeemable at the discretion of the issuer.

XL-Cayman and the Company were in compliance with all covenants by significant margins as of September 30, 2015, and XL-Cayman and the Company currently remain in compliance with all covenants.

(b) Letter of Credit Facilities and Other Sources of Collateral

The Company has letter of credit facilities provided on both syndicated and bilateral bases from commercial banks. These facilities are utilized primarily to support non-admitted insurance and reinsurance operations in the U.S. and capital requirements at Lloyd’s.

The Company’s letter of credit facilities and revolving credit facilities as of September 30, 2015 and December 31, 2014 were as follows:



Letter of Credit Summary: (U.S. dollars in thousands except percentages)	September 30, 2015 (1)			December 31, 2014 (1)
Revolving credit facilities (2) (3)	$	1,039,100		$	968,900
Available letter of credit facilities - commitments (4)	$	4,850,000		$	3,575,000
Available letter of credit facilities - in use	$	2,538,499		$	1,790,561
Collateralized by certain assets of the Company’s investment portfolio	49.9		%	66.2		%

____________


(1)	As of September 30, 2015 and December 31, 2014, there were eighteen and eight available letter of credit facilities, respectively.

(2)

As of September 30, 2015 and December 31, 2014, $976.1 million and $968.9 million, respectively, of revolving credit was available under the Company's syndicated unsecured credit agreement, which currently provides for up to $1 billion of revolving credit loans. The Company has the option to increase the size of the facilities under the syndicated secured and unsecured credit agreements by an additional $500 million across both facilities. Two bilateral facilities assumed as a result of the Catlin Acquisition with commitments totaling $150.0 million also provide for revolving credit loans. As of September 30, 2015, $63.0 million of revolving credit was available to draw under these facilities.

(3)

The credit agreements with Citicorp USA, Inc. currently provide for the issuance of letters of credit and revolving credit loans up to an aggregate amount of $345.0 million, compared to $575.0 million available under the credit agreements with Citicorp USA, Inc. as of December 31, 2014. As of September 30, 2015, $345.0 million of letters of credit were issued under these agreements, and therefore no amounts are included in this line as available to draw under these facilities. The Company also has the option to increase the maximum amount of the letters of credit and revolving credit loans available under its credit agreements with Citicorp USA, Inc. with the lender's and issuing lender's consent.


(4)	The available letter of credit facilities include approximately $1 billion that is also included in the "revolving credit facilities" line in this table.

As a result of the Catlin Acquisition, the Company has assumed the following letter of credit facilities:


•	A $450 million unsecured multi-bank facility available for utilization by certain subsidiaries and guaranteed by Green Holdings. The facility has a termination date of December 31, 2016.


•	A bilateral facility available for utilization by Catlin-Bermuda, collateralized by pledged financial assets. As of September 30, 2015, $136 million of letters of credit were issued under this facility.


•	A bilateral facility available for utilization by Catlin Re Switzerland Ltd, collateralized by pledged financial assets. As of September 30, 2015, $49 million of letters of credit were issued under this facility.


•	Four unsecured bilateral facilities available for utilization by Catlin-Bermuda and guaranteed by Green Holdings for Funds at Lloyd's purposes, amounting to a total of $375 million. One of the facilities has an expiration date of December 31, 2017, while the other three have expiration dates of December 31, 2018.


•	An unsecured bilateral facility valued in Australian dollars at A$50 million, available for utilization by certain subsidiaries of Catlin and guaranteed by Green Holdings, for the purpose of providing collateral to Australian beneficiaries.


•	Two unsecured bilateral revolving credit and letter of credit facilities, available for utilization by certain subsidiaries of Catlin and guaranteed by Green Holdings amounting to $150 million.


•	A facility managed by Lloyd's, acting for Catlin Syndicate 2003. As of September 30, 2015, $10 million of letters of credit were issued under this facility.


•	Catlin, Inc. has letters of credit amounting to $1 million issued for the benefit of various parties.

On September 8, 2015, XL-Cayman entered into a new credit agreement with Goldman Sachs Mortgage Company, as administrative agent and issuing lender, and a continuing agreement for standby letters of credit with Goldman Sachs Bank USA. On September 9, 14, and 16, 2015, XL-Cayman entered into first, second and third amendments, respectively, to such credit agreement (as amended, the Goldman Credit Agreement”). XL-Cayman entered into the Goldman Credit Agreement to replace the letter of credit capacity under a credit agreement with Citicorp USA, Inc. initially entered into on August 6, 2013 that expired by its terms on September 20, 2015.

The Goldman Credit Agreement and the continuing agreement for standby letters of credit provide for issuance of letters of credit in an aggregate amount of up to $200 million. XL-Cayman has the option to increase the maximum amount of letters of credit available under the Goldman Credit Agreement with the lender's and issuing lender's consent.

The commitments under the Goldman Credit Agreement expire on, and such credit facility is available until, the earlier of (i) September 20, 2017 and (ii) the date of termination in whole of the commitments upon an optional termination or reduction of the commitments by the account parties or upon the occurrence of certain events of default.

For details regarding the remaining facilities, see Item 8, Note 15(b), "Notes Payable and Debt and Financing Arrangements - Letter of Credit Facilities and Other Sources of Collateral," to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.