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terms of the underlying finance receivables it supports,
which eliminates certain significant refinancing, pricing
and duration risks associated with our financing. As part
of our continued objective to reduce our level of secured
debt, in November 2006, we delivered notice to GE, our
secured lender in the U.K., moving the final funding date
for that program from June 2010 to June 2007.
At December 31, 2006 and 2005, all of the lease
receivables and related secured debt are consolidated in
our financial statements because we are determined to be
the primary beneficiary of the arrangements and
frequently the counterparties have various types of
recourse to us. The lease receivables sold represent the
collateral for the related secured debt and are not
available for general corporate purposes until the related
debt is paid off. All of these arrangements are subject to
usual and customary conditions of default including
cross-defaults. In the remote circumstance that an event
of default occurs and remains uncured, in general, the
counterparty can cease providing funding for new lease
originations.
Information on restricted cash that is the result of
these third party secured funding arrangements is
included in Note 1 – “Restricted Cash and Investments”
to the Consolidated Financial Statements and disclosure
of the amounts for new funding and debt repayments are
included in the accompanying Consolidated Statement of
Cash Flows.
We also have arrangements in certain countries in
which third party financial institutions originate lease
contracts directly with our customers. In these
arrangements, we sell and transfer title to the equipment
to these financial institutions and generally have no
continuing ownership rights in the equipment subsequent
to its sale, as such the related receivable and debt are not
included in our Consolidated Financial Statements.
The following represents our total finance assets
associated with our lease or finance operations as of
December 31, 2006 and 2005, respectively:
2006 2005
Total Finance receivables, net(1) ...... $7,844 $7,849
Equipment on operating leases, net . . . 481 431
Total Finance Assets, net .......... $8,325 $8,280
(1) Includes (i) billed portion of finance receivables, net,
(ii) finance receivables, net and (iii) finance
receivables due after one year, net as included in the
Consolidated Balance Sheets as of December 31,
2006 and 2005.
Refer to Note 4 – Receivables, Net in the
Consolidated Financial Statements for further information
regarding our third party secured funding arrangements as
well as a comparison of finance receivables to our
financing-related debt as of December 31, 2006 and 2005.
As of December 31, 2006, approximately 31% of total
finance receivables were encumbered as compared to
44% at December 31, 2005.
The following represents our aggregate debt maturity schedule as of December 31, 2006:
(in millions)
Unsecured
Debt
Debt Secured
by Finance
Receivables
Other
Secured
Debt
Total
Debt
2007 ........................................................ $ 295 $1,178 $ 12 $1,485(1)
2008 ........................................................ 9 722 5 736
2009 ........................................................ 1,055 109 5 1,169
2010 ........................................................ 687 44 2 733
2011 ........................................................ 800 6 — 806
Thereafter .................................................... 2,212 — 4 2,216
Total ....................................................... $5,058 $2,059 $ 28 $7,145
(1) Quarterly secured and unsecured total debt maturities for 2007 are $215 million, $421 million, $626 million and
$223 million for the first, second, third and fourth quarters, respectively.
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