Aflac (NYSE: AFL) secures $1B 2035 and $1B 2055 note facilities
Rhea-AI Filing Summary
Aflac Incorporated entered into two contingent funding arrangements through Wynnton Funding Trusts that issued $1,000,000,000 of 2035 P-Caps and $1,000,000,000 of 2055 P-Caps to institutional investors. In return, Aflac pays a 0.9875% facility fee per annum on an unexercised right to issue up to $1,000,000,000 of 5.251% Senior Notes due 2035 and a 1.1218% facility fee per annum on an unexercised right to issue up to $1,000,000,000 of 5.991% Senior Notes due 2055. These Issuance Rights can be exercised voluntarily or automatically upon events such as missed facility fee payments, certain bankruptcy events, or if Aflac’s consolidated net worth (excluding accumulated other comprehensive income and certain non-controlling interests) falls below $10 billion, giving the company pre-arranged access to long-dated senior funding.
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Insights
Aflac secures two long-dated contingent funding lines tied to senior notes issuance.
Aflac has arranged two trust-based facilities where Wynnton Funding Trusts issued P-Caps backed by U.S. Treasury strips, while granting Aflac the right to issue up to $1,000,000,000 of 5.251% Senior Notes due 2035 and up to $1,000,000,000 of 5.991% Senior Notes due 2055. In exchange for this committed access to funding, Aflac pays facility fees of 0.9875% and 1.1218% per annum on the unused portions of each Issuance Right.
The structures include automatic or required exercise of the Issuance Rights if Aflac misses facility or expense payments, encounters specified bankruptcy-related events, sees consolidated net worth (as defined, excluding accumulated other comprehensive income and certain non-controlling interests) fall below $10 billion, or faces certain Investment Company Act classification issues. These features are designed so that, under stress conditions, the Senior Notes would be issued and the trusts would deliver Eligible Assets, effectively converting the contingent facility into term senior debt.
Aflac retains flexibility to repurchase issued Senior Notes from the trusts in exchange for Eligible Assets, or to redeem the notes early, with the redemption price set at the greater of principal or a make-whole amount plus accrued interest. The trusts then use redemption proceeds to redeem corresponding P-Caps and ultimately terminate when all P-Caps are redeemed or certain other events occur. Subsequent disclosures in periodic reports will show how often, if at all, Aflac chooses to exercise these Issuance Rights.
UNITED STATES
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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On August 27, 2025 (the “Closing Date”), pursuant to the Purchase Agreement among Aflac Incorporated (the “Company”), TD Securities (USA) LLC, Goldman Sachs & Co. LLC, Mizuho Securities USA LLC, SMBC Nikko Securities America, Inc. and Wells Fargo Securities, LLC (the “Representatives”), as representatives of the several initial purchasers named therein, and Wynnton Funding Trust, a Delaware statutory trust (the “2035 Trust”), the 2035 Trust completed the issuance and sale of 1,000,000 of its Pre-Capitalized Trust Securities redeemable August 15, 2035 (the “2035 P-Caps”) for an aggregate purchase price of $1,000,000,000, as a contingent funding arrangement with a 0.9875% facility fee per annum that provides the Company the right at any time over a ten-year period to issue and require the 2035 Trust to purchase up to $1,000,000,000 aggregate principal amount of the Company’s 5.251% Senior Notes due 2035 (the “2035 Senior Notes”), pursuant to the Facility Agreement, dated the Closing Date (the “2035 Facility Agreement”), among the Company, the 2035 Trust and The Bank of New York Mellon Trust Company, N.A., as notes trustee for the 2035 Senior Notes.
Also, on the Closing Date, pursuant to the Purchase Agreement among the Company, the Representatives, as representatives of the several initial purchasers named therein, and Wynnton Funding Trust II, a Delaware statutory trust (the “2055 Trust” and, the 2035 Trust and 2055 Trust, each a “Trust”), the 2055 Trust completed the issuance and sale of 1,000,000 of its Pre-Capitalized Trust Securities redeemable August 15, 2055 (the “2055 P-Caps” and, together with the 2035 P-Caps, the “P-Caps”) for an aggregate purchase price of $1,000,000,000, as a contingent funding arrangement with a 1.1218% facility fee per annum that provides the Company the right at any time over a thirty-year period to issue and require the 2055 Trust to purchase up to $1,000,000,000 aggregate principal amount of the Company’s 5.991% Senior Notes due 2055 (the “2055 Senior Notes” and, together with the 2035 Senior Notes, the “Senior Notes”), pursuant to the Facility Agreement, dated the Closing Date (the “2055 Facility Agreement” and, the 2035 Facility Agreement and the 2055 Facility Agreement, each a “Facility Agreement”), among the Company, the 2055 Trust and The Bank of New York Mellon Trust Company, N.A., as notes trustee for the 2055 Senior Notes.
The P-Caps do not carry registration rights and may be held only by qualified institutional buyers, as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), that are also “qualified purchasers” for purposes of Section 3(c)(7) of the Investment Company Act of 1940, as amended (the “Investment Company Act”). The issuances and sales of the P-Caps were completed as private placements pursuant to Rule 144A under the Securities Act. Each Trust invested the proceeds from the sale of P-Caps in a portfolio of principal and/or interest strips of U.S. Treasury securities (the “Eligible Assets”). The following describes the terms of each Facility Agreement, which in each case apply in respect of the respective Trust, P-Caps, Senior Notes, facility fee and maturity date.
Each Facility Agreement provides that the applicable Trust grants the Company the right to require the Trust to purchase, on one or more occasions, an aggregate principal amount at any one time outstanding and held by the Trust, of up to a maximum amount of the applicable Senior Notes (each an “Issuance Right”). The Company has agreed to pay to the Trust a semi-annual facility fee calculated at a fixed rate per annum, applied to the unexercised portion of the applicable Issuance Right. The Company may direct the Trust to grant the right to exercise the Issuance Right with respect to all or a designated amount of the Senior Notes to one or more assignees (who are consolidated subsidiaries of the Company or persons to whom the Company has an obligation) (each an “Issuance Right Assignee”), who may cause the Senior Notes to be issued to the Trust and receive the corresponding portion of Eligible Assets that would otherwise have been delivered to the Company pursuant to the exercise of such Issuance Right. On the Closing Date, the Company also entered into a trust expense reimbursement agreement with each Trust, pursuant to which the Company agreed to reimburse the Trust for its expenses in connection with the transaction, including trustees’ fees.
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The applicable Issuance Right will be exercised automatically in full if (1) the Company fails to pay the applicable facility fee when due under the applicable Facility Agreement or any amount due and owing under the applicable trust expense reimbursement agreement on any distribution date or fails on any distribution date to purchase and pay for any Eligible Assets that are due and unpaid on such distribution date and are required to be purchased at their face amount from the applicable Trust pursuant to the terms of the Facility Agreement and such failure is not cured (including payment in full of the special facility fee due as a result of such failure) within 30 days, or (2) upon certain bankruptcy events involving the Company. The Company will be required to exercise the Issuance Right in full if (1) it reasonably believes that its consolidated net worth, determined in accordance with U.S. GAAP, but excluding accumulated other comprehensive income (or loss) and equity of non-controlling interests attributable thereto, has fallen below $10 billion, which amount may be adjusted from time to time upon the occurrence of certain specified events, (2) an event of default under the indenture that governs the applicable Senior Notes has occurred or would have occurred had the Senior Notes been outstanding, or (3)(A) certain events relating to the Trust’s status as an “investment company” under the Investment Company Act, are reasonably likely to occur or have occurred and (B)(x) within five business days of such determination, the transaction agreements have not been amended to prevent or cease such event or (y) the Company has reasonably determined that no such amendment is possible. In addition, at any time following exercise of the Issuance Right in whole or in part, other than upon an automatic exercise or a required exercise as described in this paragraph, the Company will have the right to repurchase any or all of the Senior Notes then held by the Trust in exchange for Eligible Assets that entitle the Trust to receive payments of principal and interest in the same amounts as the Trust would have received on the Eligible Assets that it delivered to the Company or any Issuance Right Assignee upon the exercise of the Issuance Right in respect of the Senior Notes to be so repurchased.
The Company has the right to redeem, at its option, the applicable Senior Notes issued to the applicable Trust at any time in whole or in part and, in lieu of issuing and selling Senior Notes to the Trust pursuant to any voluntary exercise of the applicable Issuance Right, may elect to deliver a cash amount equal to the redemption price of the Senior Notes in exchange for a corresponding portion of Eligible Assets. The redemption price of the Senior Notes being redeemed will equal the greater of the principal amount of such Senior Notes or a make-whole redemption price, in each case plus accrued and unpaid interest to, but excluding, the date of redemption. The Trust will apply the redemption proceeds and such payments to redeem P-Caps having an initial purchase price equal to the principal amount of such Senior Notes on the redemption or payment date. The P-Caps will be redeemed on the maturity date or earlier upon an early redemption of the applicable Senior Notes. The Trust will terminate upon the redemption of all its outstanding P-Caps or the earlier occurrence of certain other events.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Aflac Incorporated | |
| August 27, 2025 | /s/ Robin L. Blackmon |
| (Robin L. Blackmon) | |
| Senior Vice President, Financial Services | |
| Chief Accounting Officer |
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FAQ
What contingent funding arrangements did Aflac (AFL) enter into on August 27, 2025?
Aflac entered into two Facility Agreements with Wynnton Funding Trusts under which each trust issued $1,000,000,000 of Pre-Capitalized Trust Securities (P-Caps). In return, Aflac received the right to issue and have the trusts purchase up to $1,000,000,000 of Senior Notes due 2035 and up to $1,000,000,000 of Senior Notes due 2055, subject to facility fees.
What are the key terms of Aflacs 2035 and 2055 Senior Notes Issuance Rights?
The 2035 Trust arrangement gives Aflac the right to issue up to $1,000,000,000 of 5.251% Senior Notes due 2035 with a 0.9875% per annum facility fee on the unexercised portion. The 2055 Trust arrangement provides a right to issue up to $1,000,000,000 of 5.991% Senior Notes due 2055 with a 1.1218% per annum facility fee on the unexercised portion.
When must Aflac exercise the Issuance Rights under these trust facilities?
The Issuance Rights are exercised automatically if Aflac fails to pay facility or expense amounts when due and does not cure within 30 days, or upon certain bankruptcy events. Aflac is also required to exercise in full if its defined consolidated net worth falls below $10 billion, if an event of default under the applicable indenture has occurred or would have occurred had the Senior Notes been outstanding, or if certain Investment Company Act-related events arise and are not resolved within specified parameters.
Who can hold the Aflac-related P-Caps and how were they sold?
The P-Caps may be held only by qualified institutional buyers under Rule 144A who are also qualified purchasers under Section 3(c)(7) of the Investment Company Act. The issuances and sales of the P-Caps were completed as private placements pursuant to Rule 144A under the Securities Act of 1933.
How are the P-Caps and trusts backed and eventually redeemed in Aflacs structure?
Each trust invested the P-Caps proceeds in Eligible Assets, defined as principal and/or interest strips of U.S. Treasury securities. When Senior Notes are redeemed or corresponding amounts are paid, the trusts use those proceeds to redeem P-Caps with matching initial purchase prices. The P-Caps are redeemed on their maturity dates or earlier upon early redemption of the applicable Senior Notes, and each trust terminates after all its P-Caps are redeemed or certain other events occur.
Can Aflac change or unwind its Senior Notes once issued under these facilities?
Following exercise of an Issuance Right other than upon automatic or required exercise, Aflac may repurchase any or all Senior Notes held by a trust in exchange for Eligible Assets that provide the same principal and interest payments the trust would have received. Aflac also has the right to redeem Senior Notes at any time, in whole or in part, at the greater of principal or a make-whole redemption price plus accrued interest, with the trusts using redemption proceeds to redeem corresponding P-Caps.
