6. DEBT

Debt consists of the following:


December 31,	2012			2011
(in millions)
Senior debentures (unsecured) maturing June 15, 2021	$	300.0		$	300.0
Senior debentures (unsecured) maturing March 1, 2020		200.0			200.0
Senior debentures (unsecured) maturing October 15, 2025		120.9			121.6
Junior debentures maturing February 3, 2027		59.7			59.7
Subordinated note maturing November 16, 2034		—			15.6
Subordinated note maturing September 21, 2036		—			50.0
FHLBB borrowings		171.3			163.9
Capital securities		—			7.0
Total principal debt	$	851.9		$	917.8
Unamortized fair value adjustment		—			(2.9	)
Unamortized debt issuance cost		(2.5	)		(3.0	)
Effect of foreign exchange rate changes		—			(0.8	)
Total	$	849.4		$	911.1

On June 17, 2011, the Company issued $300 million aggregate principal amount of 6.375% senior unsecured debentures due June 15, 2021. Additionally, on February 23, 2010, the Company issued $200.0 million aggregate principal amount of 7.50% senior unsecured debentures due March 1, 2020. The Company also issued 7.625 % senior unsecured debentures with a par value of $200.0 million on October 16, 1995. As of December 31, 2012 and 2011, the remaining 7.625% senior debentures have a $120.9 million and $121.6 million par value, respectively, and mature on October 15, 2025. All of the Company’s senior debentures are subject to certain restrictive covenants, including limitations on the issuance or disposition of stock of restricted subsidiaries and limitations on liens. These debentures pay interest semi-annually.

The Company’s Series B 8.207% Subordinated Deferrable Interest Debentures (“Junior Debentures”) have a par value of $59.7 million as of December 31, 2012 and 2011. These debentures pay cumulative dividends semi-annually at 8.207% and mature February 3, 2027. In 2011, the Company repurchased in several transactions, $69.5 million of these Junior Debentures at a cost of $72.1 million, resulting in a net loss on the repurchases of $2.6 million. Additionally, in 2011, the Company repurchased $8.0 million and $3.0 million of the capital securities related to AIX and PDI, respectively, at par value. In 2012, the Company called the remaining $7.0 million of the capital securities related to AIX at par value.

On July 1, 2011, the Company acquired all of the outstanding shares of Chaucer. As part of this acquisition, €12.0 million aggregate principal amount of floating rate subordinated unsecured notes due November 16, 2034 were assumed. These notes paid interest semi-annually based on the European Inter bank offer rate (Euribor) plus 3.75%. Additionally, the Company also assumed $50.0 million aggregate principal amount of floating rate subordinated unsecured notes due September 21, 2036. These notes paid interest quarterly based on the three-month LIBOR plus 3.1%. During 2012, the Company called these subordinated unsecured notes at par value. These notes had a carrying value of $60.3 million resulting in a net loss on the repurchases of $5.1 million.

In 2009, the Company received a $125.0 million FHLBB advance through the Company’s membership in the FHLBB. This collateralized advance bears interest at a fixed rate of 5.50% per annum over a twenty-year term. In July 2010, the Company committed to $46.3 million of FHLBB CDAs to finance the development of the City Square Project. See Note 3 – “Investments” for additional information on the City Square Project. These CDAs were drawn in several increments from July 2010 to January 2012 and carried fixed interest rates with a weighted average of 3.88%. In January 2013, the Company repaid the $46.3 million of FHLBB CDAs. These CDAs would have matured on July 30, 2020. Interest associated with the $46.3 million was capitalized through the construction phase of the City Square Project.

As collateral to FHLBB, Hanover Insurance pledged government agency securities with a fair value of $200.8 million and $205.7 million, for the aggregate borrowings of $171.3 million and $163.9 million as of December 31, 2012 and December 31, 2011, respectively. The amount of required collateral decreased in conjunction with the repayment of the $46.3 million of FHLBB CDAs in January 2013. The fair value of the collateral pledged must be maintained at certain specified levels of the borrowed amount, which can vary depending on the type of assets pledged. If the fair value of this collateral declines below these specified levels, Hanover Insurance would be required to pledge additional collateral or repay outstanding borrowings. Hanover Insurance is permitted to voluntarily repay the outstanding borrowings at any time, subject to a repayment fee. As a requirement of membership in the FHLBB, Hanover Insurance maintains a certain level of investment in FHLBB stock. Total holdings of FHLBB stock were $9.7 million and $9.4 million at December 31, 2012 and 2011, respectively.

Interest expense was $61.9 million in 2012, $55.0 million in 2011, and $44.3 million in 2010. At December 31, 2012, the Company was in compliance with the covenants associated with all of its debt indentures and credit arrangements.