Short-Term and Long-Term Debt

6 Months Ended

Jun. 30, 2017

SHORT-TERM AND LONG-TERM DEBT

Short-term Debt

The table below presents the Company’s short-term debt as of the dates indicated:



	June 30, 2017			December 31, 2016
	($ in millions)
Commercial paper:
Prudential Financial	$	50		$	65
Prudential Funding, LLC	817			525
Subtotal commercial paper	867			590
Current portion of long-term debt(1)	912			543
Total short-term debt(2)	$	1,779		$	1,133
Supplemental short-term debt information:
Portion of commercial paper borrowings due overnight	$	202		$	292
Daily average commercial paper outstanding	$	1,316		$	1,020
Weighted average maturity of outstanding commercial paper, in days	25			21
Weighted average interest rate on outstanding short-term debt(3)	0.83		%	0.43		%

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(1)	Includes $73 million that has recourse only to real estate investment property at December 31, 2016.

(2) Includes Prudential Financial debt of $512 million and $535 million at June 30, 2017 and December 31, 2016, respectively.


(3)	Excludes the current portion of long-term debt.

Prudential Financial and certain subsidiaries have access to other sources of liquidity, including: membership in the Federal Home Loan Banks, commercial paper programs and a contingent financing facility in the form of a put option agreement. The Company also maintains syndicated, unsecured committed credit facilities as an alternative source of liquidity. At June 30, 2017, no amounts were drawn on the credit facilities. For additional information on these alternative sources of liquidity, see Note 14 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

In July 2017, the Company amended and restated its $4.0 billion five-year credit facility that has both Prudential Financial and Prudential Funding as borrowers and a syndicate of financial institutions as lenders, extending the term of the facility to July 2022. Borrowings under the credit facility may be used for general corporate purposes, and the Company expects that it may borrow under the facility from time to time to fund its working capital needs and those of its subsidiaries. In addition, amounts under the credit facility may be drawn in the form of standby letters of credit that can be used to meet the operating needs of the Company and its subsidiaries. The credit facility contains representations and warranties, covenants and events of default that are customary for facilities of this type, and borrowings under the facility are not contingent on the borrowers’ credit ratings nor subject to material adverse change clauses. Borrowings under the facility are conditioned on the continued satisfaction of customary conditions, including the maintenance by the Company of consolidated net worth of at least $20.958 billion, which for this purpose is calculated as U.S. GAAP equity, excluding accumulated other comprehensive income (loss), equity of non-controlling interests and equity attributable to the Closed Block.

Long-term Debt

The table below presents the Company’s long-term debt as of the dates indicated:



	June 30, 2017		December 31, 2016
	June 30, 2017		December 31, 2016
	(in millions)
Fixed-rate notes:
Surplus notes	$	840	$	840
Surplus notes subject to set-off arrangements(1)	4,503		4,403
Senior notes	9,233		9,236
Mortgage debt(2)	188		177
Floating-rate notes:
Surplus notes	499		499
Surplus notes subject to set-off arrangements(1)	1,638		1,456
Senior notes(3)	515		1,063
Mortgage debt(4)	531		409
Junior subordinated notes	5,820		5,817
Subtotal	23,767		23,900
Less: assets under set-off arrangements(1)	6,141		5,859
Total long-term debt(5)	$	17,626	$	18,041

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(1)	The surplus notes have corresponding assets where rights to set-off exist, thereby reducing the amount of surplus notes included in long-term debt.


(2)	Includes $69 million and $82 million of debt denominated in foreign currency at June 30, 2017 and December 31, 2016, respectively.


(3)	Includes $56 million and $55 million of debt denominated in foreign currency at June 30, 2017 and December 31, 2016, respectively.


(4)	Includes $232 million and $221 million of debt denominated in foreign currency at June 30, 2017 and December 31, 2016, respectively.


(5)	Includes Prudential Financial debt of $15,289 million and $15,389 million at June 30, 2017 and December 31, 2016, respectively.

At June 30, 2017 and December 31, 2016, the Company was in compliance with all debt covenants related to the borrowings in the table above.

Surplus Notes

During the first quarter of 2017, the Company established a new $1.0 billion captive financing facility to finance non-economic reserves required under Guideline AXXX. Similar to the Company’s other captive financing facilities, a captive reinsurance subsidiary issues surplus notes under the facility in exchange for credit-linked notes issued by a special-purpose affiliate that are held to support non-economic reserves. The credit-linked notes are redeemable for cash upon the occurrence of a liquidity stress event affecting the captive and external counterparties have agreed to fund these payments. As of June 30, 2017, $100 million of surplus notes were outstanding under the facility and no credit-linked note payments have been required. Because valid rights of set-off exist, interest and principal payments on the surplus notes and on the credit-linked notes are settled on a net basis, and the surplus notes are reflected in the Company’s total consolidated borrowings on a net basis.

Senior Notes

Medium-Term Notes. Prudential Financial maintains a medium-term notes program under its shelf registration statement with an authorized issuance capacity of $20.0 billion. As of June 30, 2017, the outstanding balance of the Company’s medium-term notes was $9.5 billion, a decrease of $108 million from December 31, 2016, due to maturities.

Retail Medium-Term Notes. Prudential Financial also maintains a retail medium-term notes program, including the InterNotes^® program, under its shelf registration statement with an authorized issuance capacity of $5.0 billion. As of June 30, 2017, the outstanding balance of retail notes was $457 million.

Mortgage Debt. As of June 30, 2017, the Company’s subsidiaries had mortgage debt of $719 million that has recourse only to real estate property held for investment by those subsidiaries. This represents an increase of $60 million from December 31, 2016, primarily due to new borrowings of $161 million and $12 million from foreign exchange fluctuations, partially offset by $73 million of maturities and $41 million in prepayment activity.