GE 2013 Annual Report Download - page 61

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GE 2013 ANNUAL REPORT 59
Liquidity Sources
We maintain liquidity sources that consist of cash and equiv-
alents, committed unused credit lines and high-quality,
liquid investments.
We had consolidated cash and equivalents of $88.6 billion at
December 31, 2013 that were available to meet our needs. Of this,
$13.7 billion was held at GE and $74.9 billion was held at GECC.
We had committed, unused credit lines totaling $47.8 billion
that were extended to us by 50 fi nancial institutions at
December 31, 2013. GECC can borrow up to $47.8 billion under
all of these credit lines. GE can borrow up to $13.9 billion under
certain of these credit lines. These lines include $26.5 billion of
revolving credit agreements under which we can borrow funds
for periods exceeding one year. Additionally, $21.3 billion are
364-day lines that contain a term-out feature that allows us to
extend borrowings for two years from the date on which such
borrowings would otherwise be due.
Cash and equivalents of $57.0 billion at December 31, 2013
were held by non-U.S. subsidiaries. Of this amount at
December 31, 2013, $8.1 billion was indefi nitely reinvested.
Indefi nitely reinvested cash held outside of the U.S. is available
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 through short-term loans, without being subject to U.S. tax.
Under the Internal Revenue Code, these loans are permitted to
be outstanding for 30 days or less and the total of all such loans is
required to be outstanding for less than 60 days during the year.
At December 31, 2013, $2.2 billion of GE cash and equivalents
was held in countries with currency controls that may restrict the
transfer of funds to the U.S. or limit our ability to transfer funds
to the U.S. without incurring substantial costs. These funds are
available to fund operations and growth in these countries and
we do not currently anticipate a need to transfer these funds to
the U.S.
At December 31, 2013, GECC cash and equivalents of about
$12 billion were in regulated banks and insurance entities and
were subject to regulatory restrictions.
If we were to repatriate indefi nitely reinvested cash held out-
side the U.S., we would be subject to additional U.S. income taxes
and foreign withholding taxes.
Funding Plan
We reduced our GE Capital ending net investment, excluding
cash and equivalents, to $380 billion at December 31, 2013.
During 2013, GECC completed issuances of $33.7 billion of
senior unsecured debt (excluding securitizations described
below) with maturities up to 40 years (and subsequent to
December 31, 2013, an additional $3.9 billion). Average commer-
cial paper borrowings for GECC and GE during the fourth quarter
were $31.6 billion and $6.8 billion, respectively, and the maximum
amounts of commercial paper borrowings outstanding for GECC
and GE during the fourth quarter were $33.1 billion and $9.0 bil-
lion, respectively. GECC commercial paper maturities are funded
principally through new commercial paper issuances and at GE
are substantially repaid before quarter-end using indefi nitely
reinvested overseas cash, which, as discussed above, is available
for use in the U.S. on a short-term basis without being subject to
U.S. tax.
We securitize fi nancial assets as an alternative source of
funding. During 2013, we completed $8.9 billion of non-recourse
issuances and had maturities of $8.9 billion. At December 31,
2013, consolidated non-recourse borrowings were $30.1 billion.
We have 10 deposit-taking banks outside of the U.S. and
two deposit-taking banks in the U.S.—GE Capital Retail Bank, a
Federal Savings Bank (FSB), and GE Capital Bank (formerly GE
Capital Financial Inc.), an industrial bank (IB). The FSB and IB cur-
rently issue certifi cates of deposit (CDs) in maturity terms up to
10 years. On January 11, 2013, the FSB acquired the deposit busi-
ness of MetLife Bank, N.A. This acquisition added approximately
$6.4 billion in deposits and an online banking platform.
Total alternative funding at December 31, 2013 was $108 bil-
lion, composed mainly of $53 billion of bank deposits, $30 billion
of non-recourse securitization borrowings, $9 billion of fund-
ing secured by real estate, aircraft and other collateral and
$9 billion of GE Interest Plus notes. The comparable amount at
December 31, 2012 was $101 billion.
As a matter of general practice, we routinely evaluate the eco-
nomic impact of calling debt instruments where GECC has the
right to exercise a call. In determining whether to call debt, we
consider the economic benefi t to GECC of calling debt, the effect
of calling debt on GECC’s liquidity profi le and other factors. In
2013, we settled $8.4 billion of callable debt, of which $4.1 billion
was called in 2012.
EXCHANGE RATE AND INTEREST RATE RISKS are managed with a
variety of techniques, including match funding and selective use
of derivatives. We use derivatives to mitigate or eliminate cer-
tain fi nancial and market risks because we conduct business in
diverse markets around the world and local funding is not always
effi cient. In addition, we use derivatives to adjust the debt we
are issuing to match the fi xed or fl oating nature of the assets we
are originating. We apply strict policies to manage each of these
risks, including prohibitions on speculative activities. Following
is an analysis of the potential effects of changes in interest rates
and currency exchange rates using so-called “shock” tests that
seek to model the effects of shifts in rates. Such tests are inher-
ently limited based on the assumptions used (described further
below) and should not be viewed as a forecast; actual effects
would depend on many variables, including market factors
and the composition of the Company’s assets and liabilities at
that time.
• It is our policy to minimize exposure to interest rate changes.
We fund our fi nancial investments using debt or a combina-
tion of debt and hedging instruments so that the interest rates
of our borrowings match the expected interest rate profi le on
our assets. To test the effectiveness of our fi xed rate positions,