Prudential 2012 Annual Report Download - page 96

In addition, as of December 31, 2012, our Closed Block Business had outstanding mortgage dollar rolls, under which we are
committed to repurchase $505 million of mortgage-backed securities, or TBA forward contracts. These repurchase agreements do not
qualify as secured borrowings and are accounted for as derivatives. These mortgage-backed securities are considered high or highest
quality based on NAIC or equivalent rating.
Membership in the Federal Home Loan Banks
Prudential Insurance is a member of the Federal Home Loan Bank of New York, or FHLBNY. Membership allows Prudential
Insurance access to the FHLBNY’s financial services, including the ability to obtain loans and to issue funding agreements as an alternative
source of liquidity that are collateralized by qualifying mortgage-related assets or U.S. Treasury securities. Prudential Retirement Insurance
and Annuity Company, or PRIAC, is a member of the Federal Home Loan Bank of Boston, or FHLBB, which provides PRIAC access to
collateralized advances. Based on regulatory limitations, as of December 31, 2012, Prudential Insurance had an estimated maximum
borrowing capacity of $6.4 billion under the FHLBNY facility, of which $2.3 billion was outstanding, and PRIAC had an estimated
maximum borrowing capacity of $1.7 billion with no advances outstanding. Nevertheless, borrowings under these facilities are subject to
the FHLBNY’s and the FHLBB’s discretion and require the availability of qualifying assets at Prudential Insurance and PRIAC. For further
information, see Note 14 to our Consolidated Financial Statements.
Commercial Paper Programs
Prudential Financial and Prudential Funding, LLC, or Prudential Funding, a wholly-owned subsidiary of Prudential Insurance, have
commercial paper programs with an authorized issuance capacity of $3.0 billion and $7.0 billion, respectively. Prudential Financial
commercial paper borrowings generally have been used to fund the working capital needs of our subsidiaries. Prudential Funding
commercial paper borrowings have generally served as an additional source of financing to meet the working capital needs of Prudential
Insurance and its subsidiaries. Prudential Funding also lends to other subsidiaries of Prudential Financial up to limits agreed with NJDOBI.
Prudential Funding maintains a support agreement with Prudential Insurance whereby Prudential Insurance has agreed to maintain
Prudential Funding’s positive tangible net worth at all times. Prudential Financial has also issued a subordinated guarantee covering
Prudential Funding’s commercial paper program. As of December 31, 2012, Prudential Financial and Prudential Funding had outstanding
borrowings of $113 million and $359 million, respectively, under these commercial paper programs. For further information, see Note 14
to our Consolidated Financial Statements.
Credit Facilities
We have access to an aggregate of $3.75 billion of syndicated, unsecured committed credit facilities, which includes a $2 billion five-
year facility expiring in December 2016 that has Prudential Financial as borrower and a $1.75 billion three-year facility expiring in
December 2014 that has both Prudential Financial and Prudential Funding as borrowers. The facilities may be used for general corporate
purposes, including as backup liquidity for our commercial paper programs. The maximum amount of outstanding borrowings from the
five-year credit facility in 2012 was $250 million. There were no outstanding borrowings under these credit facilities as of December 31,
2012 or as of February 22, 2013.
Prudential Financial expects that it may continue to 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 require that the
Company maintain at all times consolidated net worth, relating to the Financial Services Businesses only, of at least $18.985 billion
(excluding AOCI and excluding equity of non-controlling interests). For further information, see Note 14 to our Consolidated Financial
Statements.
94 Prudential Financial, Inc. 2012 Annual Report