SECURITIZATION OF RECEIVABLES

12 Months Ended

Oct. 27, 2024

SECURITIZATION OF RECEIVABLES

SECURITIZATION OF RECEIVABLES

NOTE 5. SECURITIZATION OF RECEIVABLES

Our funding strategy includes retail note securitizations. While these securitization programs are administered in various forms, they are accomplished in the following basic steps:

1. We transfer retail notes into a bankruptcy-remote SPE.

2. The SPE issues debt to investors. The debt is secured by the retail notes.

3. Investors are paid back based on cash receipts from the retail notes.

As part of step 1, these retail notes are legally isolated from the claims of our general creditors. This ensures cash receipts from the retail notes 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 secured borrowings. The receivables and borrowings remain on our balance sheet and are separately reported as “Retail notes securitized” and “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 27, 2024, the revolving agreement had a financing limit of up to $2,000.0 of secured financings at any time. At October 27, 2024, $1,398.3 of securitization borrowings were outstanding under the revolving agreement. In November 2024, the agreement was renewed for one year with a capacity of $2,500.0.

Under both the public and private securitization programs, restricted cash held by the SPE serves as a credit enhancement. The restricted cash 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. No additional support to these programs beyond what was previously contractually required has been provided during the reporting periods.

The components of the securitization programs at October 27, 2024 and October 29, 2023 were as follows:  

	2024		2023
Retail notes securitized	$	8,768.4	$	7,356.8
Allowance for credit losses		(47.0)		(21.4)
Other assets*		186.5		152.0
Total restricted securitized assets	$	8,907.9	$	7,487.4
Securitization borrowings	$	8,429.3	$	6,995.2
Accrued interest on borrowings		13.9		12.6
Total liabilities related to restricted securitized assets	$	8,443.2	$	7,007.8

* Primarily restricted cash of $164.8 and $125.1 at October 27, 2024 and October 29, 2023, respectively.

The weighted average interest rates on securitization borrowings at October 27, 2024 and October 29, 2023 were 5.0 percent and 4.7 percent, respectively.

Although these securitization borrowings are classified as short-term since payment is required if the retail notes are liquidated early, the payment schedule for these borrowings at October 27, 2024 based on the expected liquidation of the retail notes is as follows: 2025 - $4,034.0, 2026 - $2,440.0, 2027 - $1,428.1, 2028 - $499.8, 2029 - $36.9, and later years - $3.9. At October 27, 2024 the maximum remaining term of all restricted securitized retail notes was approximately seven years.