American Express 2006 Annual Report Download - page 94

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notes to consolidated fi nancial statements
american express company
Debt issuance costs are deferred and amortized over the
term of the related instrument or, if the holder has a put
option, over the put term.
As of December 31, 2006, the Company had
$750 million principal outstanding of Subordinated
Debentures due 2036 and automatically extendible
until 2066 unless certain events occur prior to that date.
The Subordinated Debentures will accrue interest at
an annual rate of 6.80 percent until September 1, 2016
and at an annual rate of three-month LIBOR plus
2.23 percent thereafter. At the Company’s option, the
Subordinated Debentures are redeemable for cash after
September 1, 2016 at 100 percent of the principal amount
plus any accrued but unpaid interest. If the Company
fails to achieve specified performance measures it would
be required to issue shares of its common stock and
apply the net proceeds to make interest payments on the
Subordinated Debentures.
As of December 31, 2005, the Company had $2
billion principal outstanding of 1.85 percent Convertible
Senior Debentures due 2033 (the Senior Debentures),
which were unsecured obligations of the Company.
On December 1, 2006, the Senior Debentures were
remarketed into unsecured, floating rate Senior Notes
due 2033 (the Senior Notes). The Senior Notes may be
put to the Company at par on June 5, 2008, and accrue
interest at an annual rate of three-month LIBOR plus
11.435 basis points. Contingent interest payments up to
4 percent are required if the Senior Notes are not rated
at certain levels by rating agencies.
Aggregate annual maturities on long-term debt obligations (based on final maturity dates) at December 31, 2006,
are as follows:
(Millions) 2007 2008 2009 2010 2011 Thereafter Total
American Express Company (Parent Company only) $ 749 $ — $ 500 $ — $ 400 $4,345 $ 5,994
American Express Travel Related Services
Company, Inc. — — 800 — 1,200 — 2,000
American Express Credit Corporation 3,440 7,313 7,157 2,029 1,453 398 21,790
American Express Centurion Bank 3,691 1,150 2,700 — — — 7,541
American Express Bank, FSB 800 2,100 1,100 — — — 4,000
American Express Receivables Financing
Corporation V LLC — — — 600 — 600 1,200
Other 74 43 13 — — 92 222
Tota l $8,754 $10,606 $12,270 $2,629 $3,053 $5,435 $42,747
As of December 31, 2006 and 2005, the Company
maintained total bank lines of credit, including lines
supporting commercial paper borrowings, of $11.6
billion and $13.4 billion, respectively, of which $8.9
billion and $10.1 billion were unutilized as of December
31, 2006 and 2005, respectively.
The Company paid total interest (including amounts
related to discontinued operations) primarily related
to short- and long-term debt, corresponding interest
rate products and customer deposits (net of amounts
capitalized or refunded) of $3.2 billion, $2.4 billion, and
$1.6 billion in 2006, 2005, and 2004, respectively.
SHORT- AND LONG-TERM DEBT HEDGING ACTIVITY
As of December 31, 2006, in addition to the hedges of
existing short- and long-term debt, the Company has
designated the interest rate risk associated with cash flows
related to future short- and long-term debt issuances as
part of its hedging program. The notional amount of
such designated derivative financial instruments was
$3 billion, reflecting the hedge of future cash flows of
anticipated issuances in 2007 through 2010.
See Note 10 for additional discussion of the
Company’s cash flow hedging strategies.