Morgan Stanley 2014 Annual Report Download - page 237

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company’s long-term borrowings included the following components:
At December 31,
2014
At December 31,
2013
(dollars in millions)
Senior debt ....................................................... $139,565 $139,451
Subordinated debt ................................................. 8,339 9,275
Junior subordinated debentures ....................................... 4,868 4,849
Total ........................................................ $152,772 $153,575
During 2014, the Company issued and reissued notes with a principal amount of approximately $36.7 billion and
approximately $33.1 billion of notes matured or were retired. During 2013, the Company issued and reissued
notes with a principal amount of approximately $27.9 billion and approximately $38.7 billion of notes matured or
were retired.
Senior debt securities often are denominated in various non-U.S. dollar currencies and may be structured to
provide a return that is equity-linked, credit-linked, commodity-linked or linked to some other index (e.g., the
consumer price index). Senior debt also may be structured to be callable by the Company or extendible at the
option of holders of the senior debt securities. Debt containing provisions that effectively allow the holders to put
or extend the notes aggregated $2,175 million at December 31, 2014 and $1,175 million at December 31, 2013.
In addition, separate agreements are entered into by the Company’s subsidiaries that effectively allow the holders
to put the notes aggregated $551 million at December 31, 2014 and $353 million at December 31, 2013.
Subordinated debt and junior subordinated debentures generally are issued to meet the capital requirements of the
Company or its regulated subsidiaries and primarily are U.S. dollar denominated.
Senior Debt—Structured Borrowings. The Company’s index-linked, equity-linked or credit-linked borrowings
include various structured instruments whose payments and redemption values are linked to the performance of a
specific index (e.g., Standard & Poor’s 500), a basket of stocks, a specific equity security, a credit exposure or
basket of credit exposures. To minimize the exposure resulting from movements in the underlying index, equity,
credit or other position, the Company has entered into various swap contracts and purchased options that
effectively convert the borrowing costs into floating rates based upon LIBOR. These instruments are included in
the preceding table at their redemption values based on the performance of the underlying indices, baskets of
stocks, or specific equity securities, credit or other position or index. The Company carries either the entire
structured borrowing at fair value or bifurcates the embedded derivative and carries it at fair value. The swaps
and purchased options used to economically hedge the embedded features are derivatives and also are carried at
fair value. Changes in fair value related to the notes and economic hedges are reported in Trading revenues. See
Note 4 for further information on structured borrowings.
Subordinated Debt and Junior Subordinated Debentures. Included in the Company’s long-term borrowings
are subordinated notes of $8,339 million having a contractual weighted average coupon of 4.57% at
December 31, 2014 and $9,275 million having a contractual weighted average coupon of 4.69% at December 31,
2013. Junior subordinated debentures outstanding by the Company were $4,868 million at December 31, 2014
and $4,849 million at December 31, 2013 having a contractual weighted average coupon of 6.37% at both
December 31, 2014 and December 31, 2013. Maturities of the subordinated and junior subordinated notes range
from 2022 to 2067, while maturities of certain junior subordinated debentures can be extended to 2052 at the
Company’s option.
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