GE 2010 Annual Report Download - page 126

124 GE 2010 ANNUAL REPORT
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Investments in Unconsolidated Variable Interest Entities
Our involvement with unconsolidated VIEs consists of the follow-
ing activities: assisting in the formation and financing of the entity,
providing recourse and/or liquidity support, servicing the assets and
receiving variable fees for services provided. We are not required to
consolidate these entities because the nature of our involvement
with the activities of the VIEs does not give us power over decisions
that significantly affect their economic performance.
Unconsolidated VIEs at December 31, 2010 include our non-
controlling stake in PTL ($5,790 million); investments in real estate
entities ($2,071 million), which generally consist of passive limited
partnership investments in tax-advantaged, multi-family real estate
and investments in various European real estate entities; debt
investment fund ($1,877 million); and exposures to joint ventures
that purchase factored receivables ($1,596 million). Substantially all
of our other unconsolidated entities consist of passive investments
in various asset-backed financing entities.
The largest unconsolidated VIE with which we are involved
is PTL, which is a truck rental and leasing joint venture. The total
consolidated assets and liabilities of PTL at December 31, 2008 were
$7,444 million and $1,339 million, respectively. As part of our strategy
to reduce our investment in the equipment management market, we
reduced our partnership interest in PTL from 79% at December 31,
2005 to 50.9% at December 31, 2008 through a series of dispositions
to Penske Truck Leasing Corporation (PTLC), the general partner of
PTL, and an entity affiliated with PTLC. In addition, in the first quarter
of 2009, we sold a 1% partnership interest in PTL, a previously con-
solidated VIE, to PTLC. The disposition of this partnership interest,
coupled with our resulting minority position on the PTL advisory
committee and related changes in our contractual rights, resulted in
the deconsolidation of PTL. We recognized a pre-tax gain on the sale
of $296 million, including a gain on the remeasurement of our
retained investment of $189 million. The transaction price was
determined on an arm’s-length basis and GE obtained a fairness
opinion from a third-party financial advisor because of the related-
party nature of the transaction. The measurement of the fair value of
our retained investment in PTL was based on a methodology that
incorporated both discounted cash flow information and market
data. In applying this methodology, we utilized different sources of
information, including actual operating results, future business plans,
economic projections and market observable pricing multiples of
similar businesses. The resulting fair value of our retained interest
reflected our position as a noncontrolling shareowner at the conclu-
sion of the transaction. At December 31, 2010, our remaining
investment in PTL of $5,790 million comprised a 49.9% partnership
interest of $935 million and loans and advances of $4,855 million.
GECC continues to provide loans under long-term revolving credit
and letter of credit facilities to PTL.
The classification of our variable interests in these entities in our
financial statements is based on the nature of the entity and the
type of investment we hold. Variable interests in partnerships and
corporate entities are classified as either equity method or cost
method investments. In the ordinary course of business, we also
make investments in entities in which we are not the primary ben-
eficiary but may hold a variable interest such as limited partner
interests or mezzanine debt investments. These investments are
classified in two captions in our financial statements: “All other
assets” for investments accounted for under the equity method,
and “Financing receivables—net” for debt financing provided to
these entities. Our investments in unconsolidated VIEs at
December 31, 2010 and 2009 follow.
At
December 31, December 31,
(In millions) 2010 2009
Other assets and investment securities $10,375 $ 8,911
Financing receivables—net 2,240 769
Total investment 12,615 9,680
Contractual obligations to
fund new investments 1,990 1,396
Total $14,605 $11,076
In addition to the entities included in the table above, we also hold
passive investments in RMBS, CMBS and ABS issued by VIEs. Such
investments were, by design, investment grade at issuance and
held by a diverse group of investors. Further information about
such investments is provided in Note 3.
Note 25.
Commitments and Guarantees
Commitments
In our Aviation business of Technology Infrastructure, we had
committed to provide financing assistance on $1,128 million
of future customer acquisitions of aircraft equipped with our
engines, including commitments made to airlines in 2010 for
future sales under our GE90 and GEnx engine campaigns. The
GECAS business of GE Capital had placed multiple-year orders for
various Boeing, Airbus and other aircraft with list prices approxi-
mating $14,574 million and secondary orders with airlines for
used aircraft of approximately $790 million at December 31, 2010.
As of December 31, 2010, NBC Universal had certain commit-
ments to acquire film and television programming. On January 28,
2011, we transferred the NBCU business to a newly formed entity
and, as a result, these commitments are no longer ours. See
Note 2 for further discussion of the NBCU transaction.