JP Morgan Chase 2008 Annual Report Download - page 205

JPMorgan Chase & Co./ 2008 Annual Report 203
Note 23 – Long-term debt
JPMorgan Chase issues long-term debt denominated in various currencies, although predominantly U.S. dollars, with both fixed and variable inter-
est rates. The following table is a summary of long-term debt carrying values (including unamortized original issue discount, SFAS 133 valuation
adjustments and fair value adjustments, where applicable) by contractual maturity as of December 31, 2008.
By remaining maturity at 2008
December 31, Under After 2007
(in millions, except rates) 1 year 1–5 years 5 years Total Total
Parent company
Senior debt:(a) Fixed rate $ 5,030 $ 47,606(f) $ 27,272 $ 79,908 $ 29,386
Variable rate 16,999 39,050(g) 9,185 65,234 47,546
Interest rates(b) 0.20–7.63% 0.42–7.00% 1.40–7.50% 0.20–7.63% 0.75–7.43%
Subordinated debt: Fixed rate $ 3,732 $ 8,296 $ 16,938 $ 28,966 $ 27,761
Variable rate —37 1,749 1,786 1,888
Interest rates(b) 6.00–9.88% 5.25–10.00% 1.92–9.88% 1.92–10.00% 1.92–10.00%
Subtotal $ 25,761 $ 94,989 $ 55,144 $ 175,894 $ 106,581
Subsidiaries
Senior debt:(a) Fixed rate $ 1,052 $ 4,433 $ 2,885 $ 8,370 $ 6,406
Variable rate(c) 9,213 30,050 18,717 57,980 60,556
Interest rates(b) 0.03–4.45% 0.05–5.75% 0.44–14.21% 0.03–14.21% 3.70–14.21%
Subordinated debt: Fixed rate $—$ 2 $ 8,698 $ 8,700 $ 9,169
Variable rate ——1,150 1,150 1,150
Interest rates(b) —6.25% 2.33–8.25% 2.33–8.25% 4.38–8.25%
Subtotal $ 10,265 $ 34,485 $ 31,450 $ 76,200 $ 77,281
Total long-term debt(d) $ 36,026 $ 129,474 $ 86,594 $ 252,094(h)(i)(j) $ 183,862(j)
FIN 46R long-term beneficial interests:
Fixed rate $ 16 $ 486 $ 69 $ 571 $ 701
Variable rate 51 1,002 3,381 4,434 6,508
Interest rates 3.51–7.75% 3.05–8.75% 3.40–9.16% 3.05–9.16% 1.73–12.79%
Total FIN 46R long-term beneficial interests(e) $ 67 $ 1,488 $ 3,450 $ 5,005 $ 7,209
(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 Consolidated Balance Sheets. Changes in fair value of separated derivatives are recorded in principal transactions revenue. Hybrid securities
which the Firm has elected to measure at fair value are classified in the line item of the host contract on the Consolidated Balance Sheets; changes in fair value are recorded in princi-
pal transactions revenue in the Consolidated Statements of Income.
(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 the associated
derivative instruments used in SFAS 133 hedge accounting relationships, if applicable. 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 the SFAS 133 hedge accounting derivatives, the range of modified rates in effect at December 31, 2008, for total long-term
debt was 0.18% to 14.21%, versus the contractual range of 0.03% to 14.21% presented in the table above. The interest rate ranges shown exclude structured notes accounted for at
fair value under SFAS 155 or SFAS 159.
(c) Included $7.8 billion principal amount of U.S. dollar-denominated floating-rate mortgage bonds issued to an unaffiliated statutory trust, which in turn issued C
=6.0 billion in covered
bonds secured by mortgage loans at December 31, 2008.
(d) Included $58.2 billion and $70.5 billion of outstanding structured notes accounted for at fair value at December 31, 2008 and 2007, respectively.
(e) Included on the Consolidated Balance Sheets in beneficial interests issued by consolidated VIEs. Also included $1.7 billion and $3.0 billion of outstanding structured notes accounted
for at fair value at December 31, 2008 and 2007, respectively.
(f) Included $14.1 billion as of December 31, 2008, guaranteed under the TLG Program whereby newly issued senior, unsecured debt is guaranteed by the FDIC, which is discussed below.
(g) Included $6.9 billion as of December 31, 2008, guaranteed by the FDIC under the TLG Program, which is discussed below.
(h) At December 31, 2008, long-term debt aggregating $7.4 billion was redeemable at the option of JPMorgan Chase, in whole or in part, prior to maturity, based upon the terms speci-
fied in the respective notes.
(i) The aggregate principal amount of debt that matures in each of the five years subsequent to 2008 is $36.0 billion in 2009, $38.5 billion in 2010, $39.7 billion in 2011, $32.7 billion
in 2012 and $18.6 billion in 2013.
(j) Included $3.4 billion and $4.6 billion of outstanding zero-coupon notes at December 31, 2008 and 2007, respectively. The aggregate principal amount of these notes at their respec-
tive maturities was $7.1 billion and $7.7 billion, respectively.
JPMorgan Chase has elected to continue to participate in the TLG
Program, which is available to, among others, all U.S. depository insti-
tutions insured by the FDIC and all U.S. bank holding companies,
unless they have opted out of the TLG Program or the FDIC has termi-
nated their participation. Under the TLG Program, the FDIC guarantees
certain senior unsecured debt of JPMorgan Chase through the earlier
of maturity and June 30, 2012, and in return for the guarantees, the
FDIC is paid a fee based on the amount and maturity of the debt.
The weighted-average contractual interest rate for total long-term debt
was 4.06% and 5.20% as of December 31, 2008 and 2007, respec-
tively. In order to modify exposure to interest rate and currency
exchange rate movements, JPMorgan Chase utilizes derivative instru-
ments, 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 modi-
fied weighted-average interest rate for total long-term debt, including
the effects of related derivative instruments, was 3.53% and 5.13% as
of December 31, 2008 and 2007, respectively.