Discover 2009 Annual Report Download - page 128

11. Short-Term Borrowings
Short-term borrowings consist of term and overnight Federal Funds purchased and other short-term borrowings with
original maturities less than one year. The following table identifies the balances and weighted average interest rates on
short-term borrowings outstanding at period end (dollars in thousands):
November 30, 2009 November 30, 2008
Amount
Weighted
Average
Interest
Rate Amount
Weighted
Average
Interest
Rate
Other short-term borrowings(1) ............................................................................................................ $— — $500,000 0.60%
Total short-term borrowings............................................................................................................. $— — $500,000 0.60%
(1) Other short-term borrowings consist of amounts borrowed under the Federal Reserve’s Term Auction Facility. The Company was required to pledge $0.7 billion of loan receivables against this
borrowing as of November 30, 2008.
The following table identifies the interest expense paid on short-term borrowings (dollars in thousands):
For the Years Ended
November 30,
2009 2008 2007
Overnight Federal Funds purchased.................................................................................................................................. $ 156 $136 $29,840
Term Federal Funds purchased ........................................................................................................................................ 2,382 207 23,463
Other short-term borrowings ........................................................................................................................................... — — 36,016
Total interest expense on short-term borrowings .............................................................................................................. $2,538 $343 $89,319
In connection with related party transactions with the Company’s former parent company, Morgan Stanley, the
Company recorded $65.5 million in interest expense related to short-term borrowings for the year ended November 30,
2007. Prior to the Distribution, the Company repaid all outstanding balances due to Morgan Stanley.
12. Long-Term Borrowings
Long-term borrowings consist of borrowings and capital leases having original maturities of one year or more. The
following table provides a summary of the Company’s long-term borrowings and weighted average interest rates on
balances outstanding at period end (dollars in thousands):
November 30, 2009 November 30, 2008
Funding source Outstanding
Interest
Rate Outstanding
Interest
Rate
Interest Rate
Terms Maturity
Bank notes due 2009.............................................................. $ — — $ 249,977 2.54% 3-month LIBOR(1)
+ 15 basis points
February 2009
Subordinated bank notes due 2019(2) ....................................... 698,202 8.70% — — 8.70% fixed November 2019
Secured borrowings ............................................................... 528,246 0.74% 682,456 3.05% Commercial
Paper rate
+ 50 basis points
December 2010(3)
Unsecured borrowings:
Floating rate senior notes ..................................................... 400,000 0.83% 400,000 3.35% 3-month LIBOR(1)
+ 53 basis points
June 2010
Fixed rate senior notes due 2017(4) ........................................ 399,385 6.45% 399,304 6.45% 6.45% fixed June 2017
Fixed rate senior notes due 2019(5) ........................................ 400,000 10.25% — — 10.25% fixed July 2019
Total unsecured borrowings............................................... 1,199,385 799,304
Capital lease obligations ......................................................... 2,268 6.26% 3,646 6.26% 6.26% fixed Various
Total long-term borrowings ............................................... $2,428,101 $1,735,383
(1) London Interbank Offered Rate (“LIBOR”).
(2) Issued on November 16, 2009 at a face value of $700 million. The difference between the face value and the book value reflects the amount of the unamortized discount.
(3) Repayment is dependent upon the available balances of the cash collateral accounts at the various maturities of underlying securitization transactions, with final maturity in December 2010.
(4) The difference between the $400 million face value and book value reflects the amount of the unamortized discount.
(5) Issued on July 15, 2009.
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