(11) Securitization of financing receivables:

The Company, as a part of its overall funding strategy, periodically transfers certain financing receivables (retail notes) into variable interest entities (VIEs) that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes did not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.

In these securitizations, the retail notes are transferred to certain SPEs or to non-VIE banking operations, which in turn issue debt to investors. The debt securities issued to the third party investors resulted in secured borrowings, which are recorded as “Short-term securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Financing receivables securitized – net” on the balance sheet. The total restricted assets on the consolidated balance sheet related to these securitizations include the financing receivables securitized less an allowance for credit losses, and other assets primarily representing restricted cash. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the receivables held by the SPEs and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes securitized, allowance for credit losses, and other assets) of the consolidated SPEs totaled $2,128 million, $2,631 million, and $2,213 million at January 28, 2018, October 29, 2017, and January 29, 2017, respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled $2,092 million, $2,571 million, and $2,175 million at January 28, 2018, October 29, 2017, and January 29, 2017, respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In certain securitizations, the Company transfers retail notes to non-VIE banking operations, which are not consolidated since the Company does not have a controlling interest in the entities. The Company’s carrying values and interests related to the securitizations with the unconsolidated non-VIEs were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $809 million, $478 million, and $491 million at January 28, 2018, October 29, 2017, and January 29, 2017, respectively. The liabilities (short-term securitization borrowings and accrued interest) were $774 million, $454 million, and $468 million at January 28, 2018, October 29, 2017, and January 29, 2017, respectively.

In certain securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company does not service a significant portion of the conduits’ receivables, and therefore, does not have the power to direct the activities that most significantly impact the conduits’ economic performance. These conduits provide a funding source to the Company (as well as other transferors into the conduit) as they fund the retail notes through the issuance of commercial paper. The Company’s carrying values and variable interest related to these conduits were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $1,653 million, $1,155 million, and $1,655 million at January 28, 2018, October 29, 2017, and January 29, 2017, respectively. The liabilities (short-term securitization borrowings and accrued interest) related to these conduits were $1,565 million, $1,096 million, and $1,580 million at January 28, 2018, October 29, 2017, and January 29, 2017, respectively.

The Company’s carrying amount of the liabilities to the unconsolidated conduits, compared to the maximum exposure to loss related to these conduits, which would only be incurred in the event of a complete loss on the restricted assets, was as follows in millions of dollars:


	January 28, 2018
Carrying value of liabilities	$	1,565
Maximum exposure to loss		1,653

The total assets of unconsolidated VIEs related to securitizations were approximately $43 billion at January 28, 2018.

The components of consolidated restricted assets related to secured borrowings in securitization transactions follow in millions of dollars:


	January 28		October 29		January 29
	2018		2017		2017
Financing receivables securitized (retail notes)	$	4,487	$	4,172	$	4,262
Allowance for credit losses		(13)		(13)		(12)
Other assets		116		105		109
Total restricted securitized assets	$	4,590	$	4,264	$	4,359

The components of consolidated secured borrowings and other liabilities related to securitizations follow in millions of dollars:


	January 28		October 29		January 29
	2018		2017		2017
Short-term securitization borrowings	$	4,428	$	4,119	$	4,220
Accrued interest on borrowings		3		2		3
Total liabilities related to restricted securitized assets	$	4,431	$	4,121	$	4,223

The secured borrowings related to these restricted securitized retail notes are obligations that are payable as the retail notes are liquidated. Repayment of the secured borrowings depends primarily on cash flows generated by the restricted assets. Due to the Company’s short-term credit rating, cash collections from these restricted assets are not required to be placed into a segregated collection account until immediately prior to the time payment is required to the secured creditors. At January 28, 2018, the maximum remaining term of all securitized retail notes was approximately seven years.