US Bank 2012 Annual Report Download - page 60

TABLE 20 Debt Ratings
Moody’s
Standard &
Poor’s Fitch
Dominion
Bond
Rating Service
U.S. Bancorp
Short-term borrowings ......................................................... F1+ R-1 (middle)
Senior debt and medium-term notes ........................................... A1 A+ AA- AA
Subordinated debt ............................................................. A2 A A+ AA (low)
Preferred stock ................................................................. Baa1 BBB+ BBB A
Commercial paper ............................................................. P-1 A-1 F1+ R-1 (middle)
U.S. Bank National Association
Short-term time deposits ....................................................... P-1 A-1+ F1+ R-1 (high)
Long-term time deposits ....................................................... Aa3 AA- AA AA (high)
Bank notes ..................................................................... Aa3/P-1 AA-/A-1+ AA-/F1+ AA (high)
Subordinated debt ............................................................. A1 A+ A+ AA
Senior unsecured debt ......................................................... Aa3 AA- AA- AA (high)
Commercial paper ............................................................. P-1 A-1+ F1+ R-1 (high)
Additional funding is provided by long-term debt and
short-term borrowings. Long-term debt was $25.5 billion at
December 31, 2012, and is an important funding source
because of its multi-year borrowing structure. Refer to Note
12 of the Notes to Consolidated Financial Statements for
information on the terms and maturities of the Company’s
long-term debt issuances and “Balance Sheet Analysis” for
discussion on long-term debt trends. Short-term borrowings
were $26.3 billion at December 31, 2012, and supplement the
Company’s other funding sources. Refer to Note 11 of the
Notes to Consolidated Financial Statements and “Balance
Sheet Analysis” for information on the terms and trends of the
Company’s short-term borrowings.
The Company’s ability to raise negotiated funding at
competitive prices is influenced by rating agencies’ views of
the Company’s credit quality, liquidity, capital and earnings.
Table 20 details the rating agencies’ most recent assessments.
In addition to assessing liquidity risk on a consolidated
basis, the Company monitors the parent company’s liquidity.
The parent company’s routine funding requirements consist
primarily of operating expenses, dividends paid to
shareholders, debt service, repurchases of common stock and
funds used for acquisitions. The parent company obtains
funding to meet its obligations from dividends collected from
its subsidiaries and the issuance of debt securities. The
Company maintains sufficient funding to meet expected
parent company obligations, without access to the wholesale
funding markets or dividends from subsidiaries, for
12 months when forecasted payments of common stock
dividends are included and 24 months assuming dividends
were reduced to zero. The parent company currently has
available funds considerably greater than the amounts
required to satisfy these conditions.
Under United States Securities and Exchange Commission
rules, the parent company is classified as a “well-known
seasoned issuer,” which allows it to file a registration
statement that does not have a limit on issuance capacity.
“Well-known seasoned issuers” generally include those
companies with outstanding common securities with a market
value of at least $700 million held by non-affiliated parties or
those companies that have issued at least $1 billion in
aggregate principal amount of non-convertible securities,
other than common equity, in the last three years. However,
the parent company’s ability to issue debt and other securities
under a registration statement filed with the United States
Securities and Exchange Commission under these rules is
limited by the debt issuance authority granted by the
Company’s Board of Directors and/or the ALCO policy.
At December 31, 2012, parent company long-term debt
outstanding was $12.8 billion, compared with $14.6 billion at
December 31, 2011. The $1.8 billion decrease was primarily
due to $2.7 billion of medium-term note maturities and $2.7
billion of redemptions of junior subordinated debentures,
partially offset by issuances of $1.3 billion of subordinated
debt and $2.3 billion of medium–term notes. At December 31,
2012, there was $2.8 billion of parent company debt
scheduled to mature in 2013. Future debt maturities may be
met through medium-term note and capital security issuances
and dividends from subsidiaries, as well as from parent
company cash and cash equivalents.
Federal banking laws regulate the amount of dividends
that may be paid by banking subsidiaries without prior
approval. The amount of dividends available to the parent
company from its banking subsidiaries after meeting the
regulatory capital requirements for well-capitalized banks was
approximately $7.9 billion at December 31, 2012. For further
information, see Note 22 of the Notes to Consolidated
Financial Statements.
European Exposures Certain European countries have
experienced severe credit deterioration. The Company does
not hold sovereign debt of any European country, but may
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