American Express 2005 Annual Report Download - page 38

The Company’s debt offerings are placed either directly
to investors, as in the case of its commercial paper pro-
gram through Credco, or through securities brokers or
underwriters. In certain international markets, bank
borrowings are used to partially fund cardmember
receivables and loans. During 2005 and 2004, the Com-
pany diversified its funding base by borrowing under
committed bank credit facilities as part of a change in
local funding strategies in select international markets.
Diversity of funding sources by type of debt instrument,
by maturity and by investor base provides additional
insulation from unforeseen events in the short-term
debt market. The Company had the following consoli-
dated debt, on both a GAAP and managed basis, and
customer deposits outstanding at December 31, 2005
and 2004:
(Billions) 2005 2004
Short-term debt $ 15.6 $ 14.3
Long-term debt 30.8 32.7
Total debt (GAAP basis) $ 46.4 $ 47.0
Off-balance sheet securitizations 21.2 20.3
Total debt (managed basis) $ 67.6 $ 67.3
Customer deposits $ 24.6 $ 20.1
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, 2005, Credco had $6.7 billion of com-
mercial paper outstanding, net of certain short-term
investments. The outstanding amount, net of certain
short-term investments, increased $2.9 billion or 76
percent from a year ago. Average commercial paper out-
standing, net of certain short-term investments, was
$6.1 billion and $5.7 billion in 2005 and 2004,
respectively. Credco currently manages the level of
commercial paper outstanding, net of certain short-
term investments, such that the ratio of its com-
mitted bank credit facility to total short-term debt,
which consists mainly of commercial paper, is not less
than 100 percent.
Centurion Bank and FSB raise short-term debt through
various instruments. Bank notes issued and Fed
Funds purchased by Centurion Bank and FSB totaled
approximately $5.9 billion as of December 31, 2005.
Centurion Bank and FSB also raise customer deposits
through the issuance of certificates of deposit to retail
and institutional customers. As of December 31, 2005,
Centurion Bank and FSB held $5.2 billion in customer
deposits. Centurion Bank and FSB each maintain $400
million of committed bank credit lines as a backup to
short-term funding programs. Long-term funding needs
are met principally through the sale of cardmember
loans in securitization transactions. The Asset/Liability
Committees of Centurion Bank and FSB provide man-
agement oversight with respect to formulating and rati-
fying funding strategy and to ensuring that all funding
policies and requirements are met.
The Company had short-term debt at December 31,
2005 and 2004 as follows:
(Billions, except percentages) 2005 2004
Short-term debt $ 15.6 $ 14.3
Short-term debt percentage
of total debt (GAAP basis) 33.7% 30.5%
Medium- and long-term debt is raised through the offer-
ing 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, 2005, the Company
had the following amounts of medium- and long-term
debt outstanding:
(Billions)
Medium-term
Debt
Long-term
Debt
Total Medium-
and Long-term
Debt
American Express
Parent Company $ 2.0 $ 3.2 $ 5.2
American Express
Credit Corporation 8.6 8.3 16.9
American Express
Centurion Bank 3.0 1.4 4.4
American Express
Bank, FSB 2.4 — 2.4
American Express
Receivables
Financing Corp V
LLC — 1.2 1.2
Other Subsidiaries 0.1 0.6 0.7
Total $ 16.1 $ 14.7 $ 30.8
In 2005, medium- and long-term debt with maturities
ranging from 2 to 10 years was issued. The Company’s
2005 term offerings, which include those made by
Credco, Centurion Bank, FSB and the American Express
Issuance Trust (the Charge Trust), which is consolidated
by American Express Receivables Financing Corpora-
tion V LLC (RFC V), all directly or indirectly wholly-
owned subsidiaries of American Express Travel Related
Services Company, Inc. (TRS); and the American
Financial Review
AXP / AR.2005
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