Dell 2009 Annual Report Download - page 73

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Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Structured Financing Debt
During the fourth quarter of Fiscal 2010, Dell borrowed $164 million in structured financing related debt through the revolving loan
securitization program as discussed in Note 4 of the Notes to Consolidated Financial Statements. The debt is collateralized with
$314 million of financing receivables transferred into the program. The debt has a variable interest rate and an average life of 12 months
based on the underlying financing receivables. The total debt capacity related to this program is $250 million.
NOTE 4 — FINANCIAL SERVICES
Dell Financial Services L.L.C.
Dell offers or arranges various financing options and services for its business and consumer customers in the U.S. through Dell Financial
Services L.L.C. ("DFS"), a wholly-owned subsidiary of Dell. DFS's key activities include the origination, collection, and servicing of
customer receivables related to the purchase of Dell products. New financing originations, which represent the amounts of financing
provided to customers for equipment and related software and services through DFS, were $3.7 billion, $4.5 billion, and $5.7 billion
during the fiscal years ended January 29, 2010, January 30, 2009, and February 1, 2008, respectively.
During Fiscal 2010, Dell continued to transfer certain customer financing receivables to special purpose entities. The special purpose
entities are bankruptcy remote legal entities with separate assets and liabilities. The purpose of the special purpose entities is to facilitate
the funding of customer receivables in the capital markets. These special purpose entities have entered into financing arrangements with
multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. Dell provides credit enhancement to the
securitization in the form of over-collateralization. The special purpose entities may or may not be consolidated based on the terms and
conditions of the arrangement. At January 29, 2010, the special purpose entity that funds revolving loans was consolidated, and the two
special purpose entities that fund fixed term leases and loans were not consolidated. However, Dell expects these nonconsolidated special
purpose entities will be consolidated in the first quarter of Fiscal 2011 as it adopts the new accounting guidance on variable interest
entities and transfers of financial assets and extinguishment of financial liabilities.
Dell's securitization programs contain standard structural features related to the performance of the securitized receivables. These
structural features include defined credit losses, delinquencies, average credit scores, and excess collections above or below specified
levels. In the event one or more of these criteria are met and Dell is unable to restructure the program, no further funding of receivables
will be permitted and the timing of expected retained interest cash flows will be delayed, which would negatively impact the valuation of
the retained interest. At January 29, 2010, these criteria were met.
Dell services securitized receivables and earn a servicing fee. Dell's securitization transactions generally do not result in servicing assets
and liabilities as the contractual fees are adequate compensation in relation to the associated servicing cost.
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