American Express 2011 Annual Report Download - page 35

AMERICAN EXPRESS COMPANY
2011 FINANCIAL REVIEW
The upcoming approximate maturities of the Company’s long-
term unsecured debt, debt issued in connection with asset-backed
securitizations and long-term certificates of deposit are as follows:
(Billions) Debt Maturities
2012 Quarters Ending:
Unsecured
Debt
Asset-Backed
Securitizations
Certificates
of Deposit Total
March 31 $ 1.0 $ 0.5 $ 1.2 $ 2.7
June 30 1.2 2.0 0.7 3.9
September 30 0.5 3.2 0.4 4.1
December 31 1.6 1.1 0.9 3.6
Total $ 4.3 $ 6.8 $ 3.2 $ 14.3
The Company’s financing needs for the next 12 months are
expected to arise from these debt and deposit maturities as well as
changes in business needs, including changes in outstanding
cardmember loans and receivables as well as acquisition activities.
The Company considers various factors in determining the
amount of liquidity it maintains, such as economic and financial
market conditions, seasonality in business operations, growth in
its businesses, potential acquisitions or dispositions, the cost and
availability of alternative liquidity sources, and regulatory and
credit rating agency considerations.
The yield the Company receives on its cash and readily-
marketable securities is, generally, less than the interest expense
on the sources of funding for these balances. Thus, the Company
incurs substantial net interest costs on these amounts.
The level of net interest costs will be dependent on the size of
the Company’s cash and readily-marketable securities holdings,
as well as the difference between its cost of funding these
amounts and their investment yields.
Securitized Borrowing Capacity
The Company maintained a $3.0 billion committed, revolving,
secured financing facility sponsored by and with liquidity backup
provided by a syndicate of banks as of December 31, 2011 (the
secured financing facility). The secured financing facility is used
in the ordinary course of business to fund seasonal working
capital needs, as well as further enhance the Company’s
contingent funding resources. As of December 31, 2011, $3.0
billion was drawn on this facility.
Federal Reserve Discount Window
The Banks are insured depository institutions that have the
ability to borrow from the Federal Reserve Bank of San
Francisco, subject to the amount of qualifying collateral pledged.
The Federal Reserve has indicated that both credit and charge
card receivables are a form of qualifying collateral for secured
borrowing made through the discount window. Whether specific
assets will be considered qualifying collateral for secured
borrowings made through the discount window, and the amount
that may be borrowed against the collateral, remain in the
discretion of the Federal Reserve.
The Company had approximately $38.4 billion as of
December 31, 2011 in U.S. credit card loans and charge card
receivables that could be sold over time through its existing
securitization trusts, or pledged in return for secured borrowings
to provide further liquidity, subject in each case to applicable
market conditions and eligibility criteria.
Committed Bank Credit Facilities
In addition to the secured financing facility, the Company
maintained committed syndicated bank credit facilities as of
December 31, 2011, as follows:
(Billions)
Parent
Company Credco Total
Committed $0.8$6.7$7.5
Outstanding $ –$4.6$4.6
The Company’s committed bank credit facilities expire as
follows:
(Billions)
2012 $ 2.9
2014 2.0
2016 2.6
Total $ 7.5
The availability of the credit lines is subject to the Company’s
compliance with certain financial covenants, including the
maintenance by the Company of a certain level of consolidated
tangible net worth, the maintenance by Credco of a certain ratio of
combined earnings and fixed charges to fixed charges, and the
compliance by the Banks with applicable regulatory capital
adequacy guidelines. As of December 31, 2011, the Company was
in compliance with each of its covenants. The drawn balance of the
committed credit facilities of $4.6 billion as of December 31, 2011
was used to fund the Company’s business activities in the normal
course. The remaining capacity of the facilities mainly served to
further enhance the Company’s contingent funding resources.
The Company’s committed bank credit facilities do not
contain material adverse change clauses, which might otherwise
preclude borrowing under the credit facilities, nor are they
dependent on the Company’s credit rating.
Parent Company Funding
Parent Company long-term debt outstanding was $10.1 billion
and $10.3 billion as of December 31, 2011 and 2010, respectively.
The Parent Company is authorized to issue commercial paper
under a program supported by a $0.8 billion multi-purpose
committed bank credit facility. The credit facility will expire in
2012. There was no Parent Company commercial paper
outstanding during 2011 and 2010 and no borrowings have been
made under its bank credit facility.
OFF-BALANCE SHEET ARRANGEMENTS
AND CONTRACTUAL OBLIGATIONS
The Company has identified both on and off-balance sheet
transactions, arrangements, obligations and other relationships
that may have a material current or future effect on its financial
condition, changes in financial condition, results of operations,
or liquidity and capital resources.
33