Prudential 2011 Annual Report Download - page 203

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
14. SHORT-TERM AND LONG-TERM DEBT (continued)
Federal Home Loan Bank of Boston
Prudential Retirement Insurance and Annuity Company (“PRIAC”) is a member of the Federal Home Loan Bank of Boston
(“FHLBB”). Membership allows PRIAC access to collateralized advances which will be classified in “Short-term debt” or “Long-term debt,”
depending on the maturity date of the obligation. PRIAC’s membership in FHLBB requires the ownership of member stock and borrowings
from FHLBB require the purchase of activity-based stock in an amount between 3.0% and 4.5% of outstanding borrowings depending on the
maturity date of the obligation. As of December 31, 2011, PRIAC had no advances outstanding under the FHLBB facility.
The Connecticut Department of Insurance (“CTDOI”) permits PRIAC to pledge up to $2.6 billion in qualifying assets to secure
FHLBB borrowings through December 31, 2011. PRIAC must seek re-approval from CTDOI prior to borrowing additional funds after that
date. Based on available eligible assets as of December 31, 2011, PRIAC had an estimated maximum borrowing capacity, after taking into
consideration required collateralization levels and required purchases of activity-based FHLBB stock, of approximately $1.2 billion.
Credit Facilities
As of December 31, 2011, Prudential Financial and Prudential Funding maintained an aggregate of $3,750 million of revolving credit
facilities, which includes a $2,000 million five-year credit facility that has Prudential Financial as borrower and a $1,750 million three-year
credit facility that has both Prudential Financial and Prudential Funding as borrowers. These credit facilities were entered into in December
2011 and replaced the previously-existing $3,928 million of credit facilities. There were no outstanding borrowings under these credit
facilities as of December 31, 2011.
Each of the facilities is available to the applicable borrowers up to the aggregate committed credit and may be used for general
corporate purposes, including as backup liquidity for the Company’s commercial paper programs discussed above. Prudential Financial
expects that it may borrow under the five-year credit facility from time to time to fund its working capital needs and those of its
subsidiaries. In addition, up to $300 million of the five-year facility may be drawn in the form of standby letters of credit that can be used
to meet the Company’s operating needs.
The credit facilities contain representations and warranties, covenants and events of default that are customary for facilities of this
type; however, borrowings under the facilities are not contingent on the Company’s credit ratings nor subject to material adverse change
clauses. Borrowings under the credit facilities are conditioned on the continued satisfaction of other customary conditions, including the
maintenance at all times of consolidated net worth, relating to the Company’s Financial Services Businesses only, of at least $21.25 billion,
which for this purpose is calculated as U.S. GAAP equity, excluding “Accumulated other comprehensive income (loss)” and excluding
equity of noncontrolling interests. Under the applicable credit agreements, the required minimum level of consolidated net worth will be
reduced automatically in the future by an amount equal to 85 percent of the amount of any reduction, on an after-tax basis, in the total U.S.
GAAP equity attributable to the Company’s Financial Services Businesses, resulting from the Company’s expected retrospective
application of FASB’s amended authoritative guidance regarding the deferral of costs relating to the acquisition of new or renewal
insurance contracts.
As of December 31, 2011, the consolidated net worth of the Company’s Financial Services Businesses exceeded the minimum amount
required to borrow under the credit facilities.
In addition to the above credit facilities, the Company had access to $860 million of certain other lines of credit at December 31, 2011,
of which $815 million was related to its real estate separate accounts activities. At December 31, 2011, $30 million of these credit facilities
were used. The Company also has access to uncommitted lines of credit from financial institutions.
Long-term Debt
Long-term debt at December 31, is as follows:
Maturity
Dates Rate 2011 2010
(in millions)
Prudential Holdings, LLC notes (the “IHC debt”):
Series A ........................................................ 2017(1) (2) $ 333 $ 333
Series B ........................................................ 2023(1) 7.245% 777 777
Series C ........................................................ 2023(1) 8.695% 640 640
Fixed-rate notes:
Surplus notes subject to set-off arrangements ........................... 2021 4.99%-5.22% 500 0
Surplus notes .................................................... 2015-2025 5.36%-8.30% 940 942
Other fixed-rate notes(3) ........................................... 2012-2041 2.21%-11.31% 16,353 15,879
Floating-rate notes:
Surplus notes .................................................... 2016-2052 (4) 3,200 3,200
Yen-denominated notes ............................................ (5) (6) 520 0
Other floating-rate notes ........................................... 2012-2020 (7) 340 363
Junior subordinated notes .............................................. 2068 8.88%-9.00% 1,519 1,519
Subtotal ............................................................ 25,122 23,653
Less: assets under set-off arrangements(8) ................................. 500 0
Total long-term debt(9) ........................................ $24,622 $23,653
Prudential Financial, Inc. 2011 Annual Report 201