Prudential 2003 Annual Report Download - page 85

billion. In addition, upon the adoption of the revised guidance under FIN 46, $711 million in borrowings associated
with our equity security units are now included in long-term debt of Prudential Financial. The weighted average
interest rate on Prudential Financial’s long-term debt, including the effect of interest rate hedging activity, was 3.76%
for the year ended December 31, 2003.
Effective April 25, 2003, we formally allocated $1.0 billion of an unsecured committed line of credit expiring in
October 2006 to Prudential Financial. There were no outstanding borrowings under this facility as of December 31,
2003 or December 31, 2002. For a discussion of our lines of credit, see “—Lines of Credit and Other Facilities” below.
Current capital markets activities principally consist of unsecured short-term and long-term debt borrowings
issued at Prudential Funding and Prudential Financial and asset-based or secured forms of financing. The secured
financing arrangements include transactions such as securities lending and repurchase agreements, which we generally
use to finance liquid securities in our short-term spread portfolios, primarily within Prudential Insurance.
The following table sets forth total consolidated borrowings of the Company as of the dates indicated:
December 31, 2003 December 31, 2002
(in millions)
Borrowings:
General obligation short-term debt ....................................................... $ 4,738 $ 3,468
General obligation long-term debt:
Senior debt ..................................................................... 2,400 1,744
Surplus notes ................................................................... 691 690
Debt related to Equity Security Units(1) .............................................. 711 —
Total general obligation long-term debt ............................................... 3,802 2,434
Total general obligations ..................................................... 8,540 5,902
Limited and non-recourse borrowing:
Limited and non-recourse short-term debt ............................................. 1 1
Limited and non-recourse long-term debt(2) ........................................... 1,808 2,323
Total limited and non-recourse borrowing ............................................. 1,809 2,324
Total borrowings(3) ......................................................... 10,349 8,226
Total asset-based financing(4) ...................................................... 17,037 29,127
Total borrowings and asset-based financings .................................... $27,386 $37,353
(1) Long-term debt as of December 31, 2003, includes debt related to the Prudential Financial’s equity security units, previously included in
“Guaranteed beneficial interest in Trust holding solely debentures of parent” as of December 31, 2002. The $711 million includes $690 million
corresponding to contractual obligations of Equity Security Units to purchase Prudential Financial Common Stock in November 2004.
(2) As of December 31, 2003 and December 31, 2002, $1.75 billion of limited and non-recourse debt is within the Closed Block Business.
(3) Includes $ 0.5 billion and $1.3 billion related to Prudential Securities Group as of December 31, 2003 and December 31, 2002, respectively.
Does not include $1.1 billion of medium-term notes of consolidated trust entities secured by funding agreements purchased with the proceeds of
such notes, which are included in “Policyholders’ account balances”.
(4) Includes $0.7 billion and $8.9 billion related to Prudential Securities Group as of December 31, 2003 and December 31, 2002, respectively.
Total general debt obligations increased by $2.6 billion, or 45%, from December 31, 2002, reflecting a $1.3
billion net increase in long-term debt and a $1.3 billion net increase in short-term debt. The increase in long-term debt
was driven primarily by the issuance of $1.5 billion of long-term debt at Prudential Financial. In addition, upon the
adoption of FIN 46, borrowings associated with our equity security units are now included in long-term debt. These
increases were partially offset by $400 million in a mortgage repayment and another $400 million in long-term notes
becoming current at Prudential Funding. The net increase in short-term debt was driven by increased commercial paper
issuance of $1.6 billion at Prudential Funding and $412 million at Prudential Financial. These increases were partially
offset by long-term debt maturities of approximately $300 million at Prudential Funding and a $300 million surplus
note maturity at Prudential Insurance. In addition, direct third party borrowings of subsidiaries declined by $539
million, primarily due to reduced bank borrowings of $374 million at Prudential Securities Group.
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