Summary
American Express Company (AXP) announced a key partnership extension with Delta Air Lines, solidifying a long-term co-brand credit card relationship and other arrangements. While this extension is positive for strategic continuity, AXP expects to incur a pre-tax charge of approximately $100 million in the fourth quarter of 2008 related to increased costs for Delta SkyMiles redemptions. This charge reflects an adjustment to their Membership Rewards reserve. In the context of prevailing financial market conditions, AXP also provided an update on its liquidity and capital resources. The company's banking subsidiaries have secured access to Federal Reserve discount window facilities and are participating in the FDIC's Temporary Liquidity Guarantee Program (TLGP). AXP has already issued a significant amount of TLGP-guaranteed senior unsecured debt and continues to raise funds through its retail CD program, aiming to meet upcoming long-term debt maturities.
Key Highlights
- 1Extended exclusive co-brand credit card partnership and other arrangements with Delta Air Lines.
- 2Expects to record a pre-tax charge of approximately $100 million (post-tax ~$62 million) in Q4 2008 due to increased cost per point for Delta SkyMiles redemptions.
- 3Banking subsidiaries (AECB and AEBFSB) have access to Federal Reserve discount window for contingent liquidity.
- 4Participated in the FDIC's Temporary Liquidity Guarantee Program (TLGP) for senior unsecured debt issuance.
- 5Issued $750 million, $1.25 billion, and $3.5 billion in TLGP-guaranteed senior unsecured debt with various maturities.
- 6Raised approximately $4.6 billion through a retail Certificate of Deposit (CD) program as of December 5, 2008.
- 7Funds raised are being used to meet approximately $3.6 billion of long-term debt obligations maturing in Q4 2008.