JP Morgan Chase 2005 Annual Report Download - page 119

JPMorgan Chase & Co. /2005 Annual Report 117
Note 17 – Long-term debt
JPMorgan Chase issues long-term debt denominated in various currencies, although predominantly U.S. dollars, with both fixed and variable interest rates.
The following table is a summary of long-term debt (including unamortized original issue debt discount and SFAS 133 valuation adjustments):
By remaining contractual maturity at December 31, 2005 Under After 2005 2004
(in millions) 1 year 1–5 years 5 years total total
Parent company
Senior debt:(a) Fixed rate $ 5,991 $ 14,705 $ 4,224 $ 24,920 $ 25,563
Variable rate 3,574 11,049 2,291 16,914 15,128
Interest rates(b) 2.80–6.88% 0.22–6.63% 1.12–8.85% 0.22–8.85% 0.20–7.63%
Subordinated debt: Fixed rate $ 758 $ 8,241 $ 15,818 $ 24,817 $ 22,055
Variable rate — 26 1,797 1,823 2,686
Interest rates(b) 6.13–7.88% 4.80–10.00% 1.92–9.88% 1.92–10.00% 1.92–10.00%
Subtotal $ 10,323 $ 34,021 $ 24,130 $ 68,474 $ 65,432
Subsidiaries
Senior debt:(a) Fixed rate $ 636 $ 3,746 $ 2,362 $ 6,744 $ 6,249
Variable rate 5,364 21,632 5,013 32,009 22,097
Interest rates(b) 3.00–10.95% 1.71–17.00% 1.76–13.00% 1.71–17.00% 1.71–13.00%
Subordinated debt: Fixed rate $ — $ 845 $ 285 $ 1,130 $ 1,644
Variable rate — — — ——
Interest rates(b) — 6.13–6.70% 8.25% 6.13–8.25% 6.00–8.25%
Subtotal $ 6,000 $ 26,223 $ 7,660 $ 39,883 $ 29,990
Total long-term debt $ 16,323 $ 60,244 $ 31,790 $ 108,357(d)(e)(f) $ 95,422
FIN 46R long-term beneficial interests:(c)
Fixed rate $ 80 $ 9 $ 376 $ 465 $ 775
Variable rate 26 95 1,768 1,889 5,618
Interest rates(b) 3.39–7.35% 0.51–7.00% 2.42–12.79% 0.51–12.79% 0.54–12.79%
Total FIN 46R long-term beneficial interests $ 106 $ 104 $ 2,144 $ 2,354 $ 6,393
(a) Included are various equity-linked or other indexed instruments. Embedded derivatives separated from hybrid securities in accordance with SFAS 133 are reported at fair value and shown net
with the host contract on the balance sheet. Changes in fair value of separated derivatives are recorded in Trading revenue.
(b) The interest rates shown are the range of contractual rates in effect at year-end, including non-U.S. dollar fixed and variable-rate issuances, which excludes the effects of related derivative
instruments.The use of these derivative instruments modifies the Firm’s exposure to the contractual interest rates disclosed in the table above. Including the effects of derivatives, the range
of modified rates in effect at December 31, 2005, for total long-term debt was 0.49% to 17.00%, versus the contractual range of 0.22% to 17.00% presented in the table above.
(c) Included on the Consolidated balance sheets in Beneficial interests issued by consolidated variable interest entities.
(d) At December 31, 2005, long-term debt aggregating $27.7 billion was redeemable at the option of JPMorgan Chase, in whole or in part, prior to maturity, based upon the terms specified
in the respective notes.
(e) The aggregate principal amount of debt that matures in each of the five years subsequent to 2005 is $16.3 billion in 2006, $17.8 billion in 2007, $23.4 billion in 2008, $11.1 billion in 2009,
and $8.0 billion in 2010.
(f) Includes $2.3 billion of outstanding zero-coupon notes at December 31, 2005. The aggregate principal amount of these notes at their respective maturities is $5.9 billion.
The weighted-average contractual interest rate for total long-term debt was
4.62% and 4.50% as of December 31, 2005 and 2004, respectively. In order
to modify exposure to interest rate and currency exchange rate movements,
JPMorgan Chase utilizes derivative instruments, primarily interest rate and
cross-currency interest rate swaps, in conjunction with some of its debt issues.
The use of these instruments modifies the Firm’s interest expense on the
associated debt. The modified weighted-average interest rate for total long-
term debt, including the effects of related derivative instruments, was 4.65%
and 3.97% as of December 31, 2005 and 2004, respectively.
JPMorgan Chase & Co. (Parent Company) has guaranteed certain debt of its
subsidiaries, including both long-term debt and structured notes sold as part
of the Firm’s trading activities.These guarantees rank on a parity with all of
the Firm’s other unsecured and unsubordinated indebtedness. Guaranteed
liabilities totaled $170 million and $320 million at December 31, 2005 and
2004, respectively.
Junior subordinated deferrable interest debentures held by trusts
that issued guaranteed capital debt securities
At December 31, 2005, the Firm had 22 wholly-owned Delaware statutory
business trusts (“issuer trusts”) that issued guaranteed preferred beneficial
interests in the Firm’s junior subordinated deferrable interest debentures.
The junior subordinated deferrable interest debentures issued by the Firm to
the issuer trusts, totaling $11.5 billion and $10.3 billion at December 31,
2005 and 2004, respectively, were reflected in the Firm’s Consolidated bal-
ance sheets in the Liabilities section under the caption “Junior subordinated
deferrable interest debentures held by trusts that issued guaranteed capital
debt securities.”The Firm also records the common capital securities issued
by the issuer trusts in Other assets in its Consolidated balance sheets at
December 31, 2005 and 2004.