Short-term borrowings
| 2005 | 2004 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31 (Dollars in millions) | Amount | Average rate (a) |
Amount | Average rate (a) |
||||||||
| GE | ||||||||||||
| Commercial paper | ||||||||||||
| U.S. | $ | 497 | 4.40 | % | $ | — | — | % | ||||
| Non-U.S. | 1 | 2.85 | 131 | 2.52 | ||||||||
| Payable to banks | 358 | 3.99 | 407 | 2.95 | ||||||||
| Current portion of long-term debt | 129 | 4.84 | 2,563 | 2.17 | ||||||||
| Other | 142 | 308 | ||||||||||
| 1,127 | 3,409 | |||||||||||
| GECS | ||||||||||||
| Commercial paper | ||||||||||||
| U.S. | ||||||||||||
| Unsecured | 67,643 | 4.30 | 62,195 | 2.24 | ||||||||
| Asset-backed (b) | 9,267 | 4.21 | 13,842 | 2.17 | ||||||||
| Non-U.S. | 20,456 | 3.47 | 20,835 | 2.97 | ||||||||
| Current portion of long-term debt (c)(d) | 41,792 | 4.05 | 37,530 | 4.11 | ||||||||
| Other | 18,514 | 19,890 | ||||||||||
| 157,672 | 154,292 | |||||||||||
| Eliminations | (643 | ) | (506) | |||||||||
| Total | $ | 158,156 | $ | 157,195 | ||||||||
| (a) | Based on year-end balances and year-end local currency interest rates. Current portion of long-term debt included the effects of interest rate and currency swaps, if any, directly associated with the original debt issuance. |
| (b) | Entirely obligations of consolidated, liquidating securitization entities. See note 28. |
| (c) | Included short-term borrowings by consolidated, liquidating securitization entities of $697 million and $756 million at December 31, 2005 and 2004, respectively. See note 28. |
| (d) | Included $250 million of subordinated notes guaranteed by GE at December 31, 2005. |
Long-term borrowings
| December 31 (Dollars in millions) | 2005 Average rate (a) |
Maturities | 2005 | 2004 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GE | ||||||||||||
| Senior notes | 4.88 | % | 2008–2013 | $ | 6,486 | $ | 4,984 | |||||
| Industrial development/pollution control bonds | 3.83 | 2011–2027 | 299 | 307 | ||||||||
| Payable to banks, principally U.S. | 4.99 | 2007–2023 | 1,912 | 1,927 | ||||||||
| Other (b) | 384 | 407 | ||||||||||
| 9,081 | 7,625 | |||||||||||
| GECS | ||||||||||||
| Senior notes | ||||||||||||
| Unsecured | 4.45 | 2007–2055 | 180,546 | 174,893 | ||||||||
| Asset-backed (c) | 4.66 | 2007–2035 | 6,845 | 10,939 | ||||||||
| Extendible notes (d) | 4.38 | 2007–2009 | 14,022 | 14,258 | ||||||||
| Subordinated notes (e) | 6.00 | 2009–2037 | 2,984 | 1,119 | ||||||||
| 204,397 | 201,209 | |||||||||||
| ELIMINATIONS | (1,197 | ) | (963 | ) | ||||||||
| Total | $ | 212,281 | $ | 207,871 | ||||||||
| (a) | Based on year-end balances and year-end local currency interest rates, including the effects of interest rate and currency swaps, if any, directly associated with the original debt issuance. |
| (b) | A variety of obligations having various interest rates and maturities, including certain borrowings by parent operating components and affiliates. |
| (c) | Asset-backed senior notes were all issued by consolidated, liquidating securitization entities. See note 28. |
| (d) | Included obligations of consolidated, liquidating securitization entities in the amount of $38 million and $267 million at December 31, 2005 and 2004, respectively. See note 28. |
| (e) | Included $750 million and $1,000 million of subordinated notes guaranteed by GE at December 31, 2005 and 2004, respectively. |
Our borrowings
are addressed below from the perspectives of liquidity, interest rate and currency risk management. Additional information about borrowings and associated swaps can be found in note 27.
Liquidity is affected by debt maturities and our ability to repay or refinance such debt. Long-term debt maturities over the next five years follow.
| (In millions) | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GE | $ | 129 | $ | 1,733 | $ | 1,574 | $ | 48 | $ | 18 | |||||
| GECS | 41,598 | (a) | 41,381 | (b) | 42,385 | 26,928 | 18,549 | ||||||||
| (a) | Floating rate extendible notes of $297 million are due in 2006, but are extendible at the option of the investors to a final maturity in 2008. Fixed and floating rate notes of $1,059 million contain put options with exercise dates in 2006, but have final maturity dates in 2007 ($250 million), 2008 ($350 million) and beyond 2010 ($459 million). |
| (b) | Floating rate extendible notes of $14,022 million are due in 2007, of which $2,000 million are extendible at the option of the investors to a final maturity in 2009. |
Committed credit lines totaling $57.2 billion had been extended to us by 75 banks at year-end 2005. Included in this amount was $47.7 billion provided directly to GECS and $9.5 billion provided by 19 banks to GE, to which GECS also has access. The GECS lines include $27.4 billion of revolving credit agreements under which we can borrow funds for periods exceeding one year. The remaining $29.8 billion are 364-day lines of which $29.7 billion contain a term-out feature that allows GE or GECS to extend the borrowings for one year from the date of expiration of the lending agreement. We pay banks for credit facilities, but compensation amounts were insignificant in each of the past three years.
Interest rate and currency risk is managed through the direct issuance of debt or use of derivatives. We take positions in view of anticipated behavior of assets, including prepayment behavior. We use a variety of instruments, including interest rate and currency swaps and currency forwards, to achieve our interest rate objectives. The following table shows GECS borrowing positions considering the effects of swaps of currencies and interest rates.
GECS effective borrowings (including swaps)
| 2005 | 2004 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| December 31 (Dollars in millions) | Amount | Average rate | Amount | ||||||
| Short-term (a) | $ | 97,202 | 3.95 | % | $ | 90,754 | |||
| Long-term (including current portion) | |||||||||
| Fixed rate (b) | $ | 161,771 | 4.65 | % | $ | 142,510 | |||
| Floating rate | 103,096 | 4.32 | 122,237 | ||||||
| Total long-term | $ | 264,867 | $ | 264,747 | |||||
| (a) | Included commercial paper and other short-term debt. |
| (b) | Included fixed-rate borrowings and $16,868 million ($23,642 million in 2004) notional long-term interest rate swaps that effectively convert the floating-rate nature of short-term borrowings to fixed rates of interest. |
At December 31, 2005, interest rate swap maturities ranged from 2006 to 2041, including swap maturities for hedges of commercial paper that ranged from 2006 to 2024. The use of commercial paper swaps allows us to match our actual asset profile more efficiently and provides more flexibility as it does not depend on investor demand for particular maturities.
The following table provides additional information about derivatives designated as hedges of borrowings in accordance with SFAS 133.
Derivative fair values by activity/instrument
| December 31 (In millions) | 2005 | 2004 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Cash flow hedges | $ | 96 | $ | (1,134 | ) | ||||
| Fair value hedges | (39 | ) | 1,864 | ||||||
| Total | $ | 57 | $ | 730 | |||||
| Interest rate swaps | $ | (1,053 | ) | $ | (1,464 | ) | |||
| Currency swaps | 1,110 | 2,194 | |||||||
| Total | $ | 57 | $ | 730 | |||||
At December 31, 2005, approximately 49% of our interest rate swaps related to borrowing were exempt from ongoing tests of their effectiveness as hedges. We regularly assess the effectiveness of all other hedge positions using a variety of techniques, including cumulative dollar offset and regression analysis depending on which method was selected at inception of the respective hedge. See note 27.
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