American Express 2003 Annual Report Download - page 56

(p.54_axp_ financial review)
Short-term debt is defined as any debt with an original maturity of 12 months or less. The commercial paper market
represents the primary source of short-term funding for the Company. Credco’s commercial paper is a widely recognized
name among short-term investors and is a principal source of debt for the Company. At December 31, 2003, Credco had
$8.8 billion of commercial paper outstanding, net of certain short-term investments. The outstanding amount, net of cer-
tain short-term investments, declined $0.5 billion or 5.6 percent from a year ago as part of the Company’s efforts to lessen
its reliance on short-term funding sources. Average commercial paper outstanding, net of certain short-term investments,
was $7.7 billion and $10.6 billion in 2003 and 2002, respectively. TRS currently manages the level of commercial paper out-
standing, net of certain short-term investments, such that the ratio of its committed bank credit facility to total short-term
debt, which consists mainly of commercial paper, is not less than 100%.
Centurion Bank raises short-term debt through various instruments. Bank notes issued and Fed Funds purchased by Cen-
turion Bank totaled approximately $7.6 billion as of December 31, 2003. Centurion Bank also raises customer deposits
through the issuance of certificates of deposits to retail and institutional customers. As of December 31, 2003, Centurion
Bank held $8.8 billion in customer deposits. Long-term funding needs are met principally through the sale of cardmember
loans in securitization transactions. Centurion Bank maintains $320 million of committed bank credit lines as a backup
to its short-term funding programs. The Asset/Liability Committee of Centurion Bank provides management oversight to
Centurion Bank with respect to formulating and ratifying funding strategy and to ensuring that all funding policies and
requirements are met.
Medium- and long-term debt is raised through the offering of debt securities in the U.S. and international capital markets.
Medium-term debt is generally defined as any debt with an original maturity greater than 12 months but less than 36
months. Long-term debt is generally defined as any debt with an original maturity greater than 36 months. At December
31, 2003, TRS and its subsidiaries had the following amounts of medium- and long-term debt outstanding:
(Billions) Credco Centurion Other Subsidiaries Total TRS
Medium-term debt $9.4 $ 0.1 $ 0.9 $ 10.4
Long-term debt 2.0 — 4.2 6.2
Total medium- and long-term debt $11.4 $ 0.1 $ 5.1 $ 16.6
During 2003, TRS further diversified its term funding sources through the issuance of new types of debt instruments and
through the issuance of debt at maturities attractive to investor segments new to the Company:
•$2 billion of extendible medium-term notes, a new debt instrument issued by Credco for the first time, raised proceeds
for up to 5 years at an attractive cost.
•$1 billion of extendible notes issued through a private placement. This debt was offered to eligible money market fund
investors and expanded Credco’s investor base.
•$1 billion of 5-year notes issued by Credco.
The following table highlights TRS’ outstanding debt and off-balance sheet securitizations as of December 31, 2003
and 2002:
(Billions) 2003 2002
Short-term debt $21.8 $21.7
Long-term debt 16.6 14.8
Total debt (GAAP basis) $38.4 $36.5
Off-balance sheet securitizations 19.5 17.2
Total debt (managed basis) $57.9 $53.7