SECURITIZATION OF FINANCING RECEIVABLES

12 Months Ended

Oct. 29, 2023

SECURITIZATION OF FINANCING RECEIVABLES

SECURITIZATION OF FINANCING RECEIVABLES

12. SECURITIZATION OF FINANCING RECEIVABLES

Our funding strategy includes receivable securitizations, which allows us to receive cash for financing receivables immediately. While these securitization programs are administered in various forms, they are accomplished in the following basic steps:

1. We transfer financing receivables into a bankruptcy-remote special purpose entity (SPE).

2. The SPE issues debt to investors. The debt is secured by the financing receivables.

3. Investors are paid back based on cash receipts from the financing receivables.

As part of step 1, these receivables are legally isolated from the claims of our general creditors. This ensures cash receipts from the financing receivables are accessible to pay back securitization program investors. The structure of these transactions does not meet the accounting criteria for a sale of receivables. As a result, they are accounted for as a secured borrowing. The receivables and borrowings remain on our balance sheet and are separately reported as “Financing receivables securitized – net” and “Short-term securitization borrowings,” respectively.

We offer securitization programs to institutional investors and other financial institutions through public issuances or privately through a revolving credit agreement. At October 29, 2023, the revolving agreement had a financing limit of up to $1,500. At October 29, 2023, $1,281 of securitization borrowings were outstanding under the revolving agreement. In November 2023, the agreement was renewed for one year with a capacity of $2,000.

Restricted cash held by the SPE serves as a credit enhancement. It would be used to satisfy receivable payment deficiencies, if any. The cash restriction is removed either after all secured borrowing payments are made or proportionally as the secured receivables are collected and the borrowing obligations are reduced.

The components of the securitization programs were as follows at the end of 2023 and 2022:

	2023		2022
Financing receivables securitized (retail notes)	$	7,357	$	5,952
Allowance for credit losses		(22)		(16)
Other assets (primarily restricted cash)		152		155
Total restricted securitized assets	$	7,487	$	6,091
Short-term securitization borrowings	$	6,995	$	5,711
Accrued interest on borrowings		13		6
Total liabilities related to restricted securitized assets	$	7,008	$	5,717

The weighted-average interest rates on short-term securitization borrowings at October 29, 2023 and October 30, 2022 were 4.7 percent and 2.8 percent, respectively.

Although these securitization borrowings are classified as short-term since payment is required if the financing receivables are liquidated early, the payment schedule for these borrowings at October 29, 2023 based on the expected liquidation of the retail notes is as follows: 2024 - $3,278, 2025 - $2,076, 2026 - $1,187, 2027 - $417, 2028 - $44, and later years - $4.