American Express 2007 Annual Report Download - page 46

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2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
Diversity of funding sources by type of debt instrument, by
maturity and by investor base provides additional insulation
from unforeseen events in the debt market. The Company had
the following consolidated debt, on both a GAAP and managed
basis, and customer deposits outstanding at December 31:
(Billions) 2007 2006
Short-term debt $ 17.8 $15.2
Long-term debt 55.3 42.7
Total debt (GAAP basis) 73.1 57.9
Off-balance sheet securitizations 22.7 20.2
Total debt (managed basis) 95.8 78.1
Customers’ deposits 15.4 12.0
Total debt (managed) and
customers’ deposits $111.2 $90.1
Short-term debt is defined as any debt with an original maturity
of 12 months or less. Credco’s commercial paper is a widely
recognized name among short-term investors and is a principal
source of short-term debt for the Company. Centurion Bank
and FSB raise short-term debt through various instruments.
The Company had the following short-term debt outstanding
at December 31:
(Billions) 2007 2006
Credco:
Commercial Paper $10.5 $ 5.8
Other 0.6 0.1
Centurion Bank and FSB:
Bank Notes 2.9 6.0
Fed Funds 2.4 1.8
Other 1.4 1.5
Total $17.8 $15.2
Average commercial paper outstanding was $7.8 billion in
2007 and 2006. Credco currently manages the level of short-
term debt outstanding such that its back-up liquidity, including
available bank credit facilities and term liquidity portfolio
investment securities, is not less than 100 percent of net short-
term debt. Net short-term debt, which consists of commercial
paper and certain other short-term borrowings less cash and
cash equivalents, was $7.9 billion at December 31, 2007. Based
on the maximum available borrowings under bank credit
facilities and term liquidity portfolio investment securities,
Credco’s total back-up liquidity coverage of net short-term
debt was 140 percent and 212 percent at December 31, 2007
and 2006, respectively.
The Company had short-term debt as a percentage of total
debt at December 31 as follows:
2007 2006
Short-term debt percentage
of total debt (GAAP basis) 24.3% 26.3%
Centurion Bank and FSB also raise customer deposits through
the issuance of certificates of deposit to retail and institutional
customers. As of December 31, 2007, Centurion Bank and FSB
held $14.7 billion in customer deposits.
In 2007, debt with maturities primarily ranging from 2 to
10 years was issued in the U.S. and international markets. The
Company’s 2007 offerings, which include those made by the
Parent Company, Credco, Centurion Bank, FSB, American
Express Receivables Financing Corporation LLC V (the Charge
Trust) and the American Express Credit Account Master Trust
(the Lending Trust) are presented in the following table on
both a GAAP and managed basis:
(Billions) Amount
American Express Company
(Parent Company only)(a):
Fixed Rate Senior Notes $ 1.5
American Express Credit Corporation:
Fixed and Floating Rate Senior Notes 3.1
Borrowings under Bank Credit Facilities 0.4
American Express Centurion Bank:
Fixed and Floating Rate Senior Notes 7.2
American Express Bank, FSB:
Fixed and Floating Rate Senior Notes 6.7
American Express Receivables Financing
Corporation LLC V:
Floating Rate Senior Notes and
Subordinated Notes 2.0
GAAP Basis 20.9
American Express Credit Account
Master Trust:
Trust Investor Certificates
(off-balance sheet) 6.0
Managed Basis $26.9
(a) The table above excludes the remarketing of the Convertible Senior
Debentures as Senior Notes described below.
The Company continues to issue debt with a wide range of
maturities to reduce and spread out the refinancing requirement
in future periods. The Company expects that its planned
funding during 2008 will be met through a combination of
similar sources to those on which it currently relies. However,
the Company continues to assess its needs and investor demand
and may change the mix of its existing sources as well as seek
to add new sources to its funding mix. The Company’s funding
plan is subject to various risks and uncertainties, such as
disruption of financial markets, market capacity and demand
for securities offered by the Company, regulatory changes,
ability to sell receivables and the performance of receivables
previously sold in securitization transactions. Many of these
risks and uncertainties are beyond the Company’s control.
At December 31, 2007, the Parent Company had an
unspecified amount of debt or equity securities and Credco had
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