Prudential 2012 Annual Report Download - page 97

Financing Activities
As of December 31, 2012 and 2011, total short- and long-term debt of the Company on a consolidated basis was $27.2 billion and
$27.0 billion, respectively. The following table sets forth total consolidated borrowings of the Company as of the dates indicated. We may,
from time to time, seek to redeem or repurchase our outstanding debt securities through open market purchases, individually negotiated
transactions or otherwise. Any such repurchases will depend on prevailing market conditions, our liquidity position and other factors.
December 31, 2012 December 31, 2011
Prudential
Financial
Other
Subsidiaries Consolidated
Prudential
Financial
Other
Subsidiaries Consolidated
(in millions)
General obligation short-term debt:
Commercial paper(1) ...................................... $ 113 $ 359 $ 472 $ 296 $ 870 $ 1,166
Current portion of long-term debt and other(2)(3) ................ 1,734 203 1,937 956 214 1,170
Subtotal ..................................................... 1,847 562 2,409 1,252 1,084 2,336
General obligation long-term debt:
Senior debt(3)(4) ......................................... 12,404 1,916 14,320 15,781 1,432 17,213
Junior subordinated debt .................................... 4,594 0 4,594 1,519 0 1,519
Surplus notes(5) .......................................... 0 4,140 4,140 0 4,140 4,140
Subtotal ..................................................... 16,998 6,056 23,054 17,300 5,572 22,872
Total general obligations ............................... 18,845 6,618 25,463 18,552 6,656 25,208
Limited recourse borrowing(6):
Current portion of long-term debt ............................ 0 75 75 0 0 0
Long-term debt ........................................... 0 1,675 1,675 0 1,750 1,750
Total limited recourse borrowings ........................ 0 1,750 1,750 0 1,750 1,750
Total borrowings ............................................. $18,845 $8,368 $27,213 $18,552 $8,406 $26,958
(1) See “—Alternative Sources of Liquidity” above for a discussion on our use of commercial paper
(2) Includes collateralized borrowings from the Federal Home Loan Bank of New York of $100 million and $199 million at December 31, 2012 and 2011,
respectively. For additional information on these borrowings, see Note 14 to the Consolidated Financial Statements.
(3) Does not include $1,780 million and $3,197 million of medium-term notes of consolidated trust entities secured by funding agreements purchased with
the proceeds of such notes as of December 31, 2012 and 2011, respectively, or $1.9 billion or $1.5 billion of collateralized funding agreements issued to
the Federal Home Loan Bank of New York as of December 31, 2012 and 2011, respectively. These notes and funding agreements are included in
“Policyholders’ account balances.” For additional information on these obligations, see Notes 10 and 14 to the Consolidated Financial Statements
(4) Includes collateralized borrowings from the Federal Home Loan Bank of New York of $280 million and $725 million at December 31, 2012 and 2011,
respectively. For additional information on these borrowings, see Note 14 to the Consolidated Financial Statements.
(5) Amounts are net of assets under set-off arrangements of $1,000 million and $500 million, as of December 31, 2012 and 2011, respectively
(6) Limited and non-recourse borrowing represents outstanding debt of Prudential Holdings, LLC that is attributable to the Closed Block Business. See
“Prudential Holdings, LLC Notes” within Note 14 to the Consolidated Financial Statements for additional information.
As of December 31, 2012 and 2011, we were in compliance with all debt covenants related to the borrowings in the table above. For
further information on the terms of our short- and long-term debt obligations, see Note 14 to our Consolidated Financial Statements.
Based on the use of proceeds, we classify our borrowings as capital debt, investment-related debt, and debt related to specified
businesses. Capital debt, which is debt utilized to meet the capital requirements of our businesses, was $10.6 billion and $11.2 billion as of
December 31, 2012 and 2011, respectively. Investment-related debt of $10.5 billion and $8.9 billion as of December 31, 2012 and 2011,
respectively, consists of debt issued to finance specific investment assets or portfolios of investment assets, the proceeds from which will
service the debt. Specifically, this includes institutional spread lending investment portfolios, assets supporting reserve requirements under
Regulation XXX and Guideline AXXX as described below, as well as institutional and insurance company portfolio cash flow timing
differences. Our remaining borrowings are utilized for business funding to meet specific purposes, including funding new business
acquisition costs associated with our individual annuities business, operating needs associated with hedging our individual annuities
products as discussed above and activities associated with our asset management business.
Prudential Financial Borrowings
Long-term borrowings are conducted primarily by the holding company, Prudential Financial. It borrows these funds to meet its
capital and other funding needs, as well as the capital and funding needs of its subsidiaries. Prudential Financial maintains a shelf
registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned
Issuer” under SEC rules, Prudential Financial’s shelf registration statement provides for automatic effectiveness upon filing and has no
stated issuance capacity.
Prudential Financial primarily issues senior debt under its Medium-Term Note, Series D program that currently has an authorized
issuance capacity of $20 billion, of which approximately $8.7 billion remained available as of December 31, 2012. Prudential Financial
also maintains a retail medium-term notes program, including InterNotes®that has an authorized issuance capacity of $5.0 billion, of which
approximately $4.3 billion remained available as of December 31, 2012. The weighted average interest rate on Prudential Financial’s
senior notes, including the effect of interest rate hedging activity, was 5.27% and 5.24% for the years ended December 31, 2012 and 2011,
respectively, excluding the effect of debt issued to consolidated subsidiaries.
Prudential Financial, Inc. 2012 Annual Report 95