GE 2011 Annual Report Download - page 61

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GE 2011 ANNUAL REPORT 59
GECS is a savings and loan holding company under U.S. law
and became subject to Federal Reserve Board (FRB) supervision
on July 21, 2011, the one-year anniversary of the Dodd-Frank
Wall Street Reform and Consumer Protection Act. The FRB has
recently fi nalized a regulation that requires certain organizations
it supervises to submit annual capital plans for review, including
institutions’ plans to make capital distributions, such as divi-
dend payments. The applicability and timing of this proposed
regulation to GECS is not yet determined; however, the FRB has
indicated that it expects to extend these requirements to large
savings and loan holding companies through separate rulemak-
ing or by order. We expect that GECS capital allocation planning
will be subject to FRB review, which could affect the timing of the
GE Capital dividend to the parent.
Actions taken to strengthen and maintain our liquidity are
described in the following section.
Liquidity Sources
We maintain liquidity sources that consist of cash and equivalents
and a portfolio of high-quality, liquid investments (Liquidity
Portfolio) and committed unused credit lines.
We have consolidated cash and equivalents of $84.5 billion
at December 31, 2011, which is available to meet our needs. See
Statement of Financial Position. At GECS, about $9 billion is in
regulated bank and insurance entities and is subject to regulatory
restrictions. Most of GE’s cash is held outside the U.S. and is avail-
able to fund operations and other growth of non-U.S. subsidiaries;
it is also available to fund our needs in the U.S. on a short-term
basis without being subject to U.S. tax. Under current tax laws,
should GE or GECS determine to repatriate cash and equivalents
held outside the U.S., we may be subject to additional U.S. income
taxes and foreign withholding taxes. Less than $1 billion is held in
restricted countries.
In addition to our $84.5 billion of cash and equivalents, we
have a centrally-managed portfolio of high-quality, liquid invest-
ments with a fair value of $3.6 billion at December 31, 2011. The
Liquidity Portfolio is used to manage liquidity and meet the oper-
ating needs of GECS under both normal and stress scenarios.
The investments consist of unencumbered U.S. government
securities, U.S. agency securities, securities guaranteed by the
government, supranational securities, and a select group of non-
U.S. government securities. We believe that we can readily obtain
cash for these securities, even in stressed market conditions.
We have committed, unused credit lines totaling $52.4 bil-
lion that have been extended to us by 58 fi nancial institutions at
December 31, 2011. These lines include $35.1 billion of revolving
credit agreements under which we can borrow funds for peri-
ods exceeding one year. Additionally, $16.7 billion are 364-day
lines that contain a term-out feature that allows us to extend
borrowings for one year from the date of expiration of the
lending agreement.
At December 31, 2011, our aggregate cash and equivalents
and committed credit lines were more than twice GECS’ commer-
cial paper borrowings balance.
Funding Plan
We have reduced our GE Capital ending net investment, exclud-
ing cash and equivalents, from $526 billion at January 1, 2010 to
$445 billion at December 31, 2011.
In 2011, we completed issuances of $26.9 billion of senior
unsecured debt and $2.0 billion of subordinated notes with
maturities up to 25 years (and subsequent to December 31, 2011,
an additional $11.6 billion). Average commercial paper borrow-
ings for GECS and GE during the fourth quarter were $42.4 billion
and $15.6 billion, respectively, and the maximum amount of com-
mercial paper borrowings outstanding for GECS and GE during
the fourth quarter was $45.0 billion and $18.7 billion, respectively.
GECS commercial paper maturities are funded principally through
new issuances and at GE are substantially repaid by quarter-end
using overseas cash which is available for use in the U.S. on a
short-term basis without being subject to U.S. tax.
Under the Federal Deposit Insurance Corporation’s (FDIC)
Temporary Liquidity Guarantee Program (TLGP), the FDIC guaran-
teed certain senior, unsecured debt issued by GECC on or before
October 31, 2009 for which we paid $2.3 billion of fees to the FDIC
for our participation. Our TLGP-guaranteed debt has remaining
maturities of $35 billion in 2012. We anticipate funding these and
our other long-term debt maturities through a combination of
existing cash, new debt issuances, collections exceeding origi-
nations, dispositions, asset sales, deposits and other alternative
sources of funding. GECC and GE are parties to an Eligible Entity
Designation Agreement and GECC is subject to the terms of a
Master Agreement, each entered into with the FDIC. The terms
of these agreements include, among other things, a requirement
that GE and GECC reimburse the FDIC for any amounts that the
FDIC pays to holders of GECC debt that is guaranteed by the FDIC.
We securitize fi nancial assets as an alternative source of fund-
ing. During 2011, we completed $11.8 billion of non-recourse
issuances and had maturities of $12.0 billion. At December 31,
2011, consolidated non-recourse borrowings were $29.3 billion.
We anticipate that securitization will remain a part of our overall
funding capabilities notwithstanding the changes in consolida-
tion rules described in Notes 1 and 24.
Our issuances of securities repurchase agreements are
insignifi cant and are limited to activities at certain of our for-
eign banks. At December 31, 2011 and December 31, 2010, we
were party to repurchase agreements totaling $0.1 billion and
$0.2 billion, respectively, which were accounted for as on-book
fi nancings. We have had no repurchase agreements which were
not accounted for as fi nancings and we do not engage in securi-
ties lending transactions.
We have deposit-taking capability at 11 banks outside of the
U.S. and two banks in the U.S.—GE Capital Retail Bank (formerly
GE Money Bank), a Federal Savings Bank (FSB), and GE Capital
Financial Inc., an industrial bank (IB). The FSB and IB currently
issue certifi cates of deposit (CDs) in maturity terms from three
months to ten years.
Total alternative funding at December 31, 2011 was $66 bil-
lion, composed mainly of $43 billion bank deposits, $9 billion
of funding secured by real estate, aircraft and other collateral
and $8 billion GE Interest Plus notes. The comparable amount at
December 31, 2010 was $60 billion.