[A-List] GE: Reshaing the balance sheet

[Sabri Oncu <soncu@xxxxxxxxxxx>]

GE Capital adds $2bn bank credit to facility
By Andrew Hill and Gary Silverman in New York
Published: May 30 2002 21:57 | Last Updated: May 30 2002 21:57

GE Capital has further secured its financial position in the face
of a more critical market by adding $2bn of bilateral bank credit
lines to the $18bn syndicated facility announced last week.

About 12 individual investment and commercial banks approached
the group, the financial arm of General Electric, after the
syndicated deal was agreed, GE Capital said.

The securing of bilateral back-up lines marks the latest step in
the reshaping of the company's balance sheet. The group is to
price on Friday a $6bn issue of long-term bonds, one of the
largest US dollar-denominated corporate bond deal since it issued
$11bn of bonds in March.

GE Capital was under heavy fire at the time for its high level
short-term commercial paper borrowings - $117bn at the end of
December - which were backed by only $33bn of credit lines.

Companies of GE's financial strength do not expect to draw on
their credit lines, but in the past 18 months some
investment-grade issuers such as Xerox have found themselves
unexpectedly shut out of the short-term commercial paper market
following a deterioration of financial conditions.

Although rating agencies say GE is in little danger of a
downgrade from its triple-A status, questions about accounting
transparency and strategic challenges rocked the blue-chip
bellwether this year and the group is making an effort to shore
up its balance sheet.

It is also taking advantage of sustained demand from banks
wishing to back the company and perhaps benefit from future
business offered by the US conglomerate. GE Capital's $18bn
syndicated credit facility was $3bn larger than originally
planned and it was priced in line with credit lines offered to
companies of similar financial strength.

Jim Parke, GE Capital's chief financial officer, said the $2bn of
bilateral arrangements meant the company now had total back-up
lines of $53bn.

Much of GE Capital's existing $33bn in credit facilities is in
the form of bilateral lines.

Unlike syndicated arrangements, the terms of bilateral credit
lines and the names of the banks offering them are rarely
revealed to the market.

Mr Parke denied in an interview that GE Capital was reacting to
short-term market concerns. He said the group had begun planning
an increase in credit lines last July and talks with bankers
started in September. But after September 11 "nobody wanted to
talk about it, and rightly so". Instead, GE Capital took
advantage of continued demand for GE commercial paper to finance
a flurry of acquisitions at the end of last year.

Analysts indicated on Thursday that demand for the latest $6bn
debt issue was also strong. They said it might pay a slightly
lower interest rate than the March deal, despite earlier
expectations that GE Capital would be forced to price it more
attractively.

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GE Capital secures $18bn credit facility
By Andrew Hill in New York
Published: May 24 2002 5:00 | Last Updated: May 24 2002 5:00

GE Capital yesterday shored up its short-term borrowings with an
$18bn credit line, $3bn larger than originally planned.

The new facility means the group, which runs the financial
businesses of US conglomerate General Electric, could draw on up
to $51bn of emergency back-up lines if it were shut out of the
financial markets.

GE faced criticism from some bondholders and credit analysts in
March after it revealed that it had ended 2001 with outstanding
commercial paper - short-term debt - of $117bn.

GE argued that the build-up was the result of a string of
acquisitions by GE Capital at the end of last year, but
nervousness about its finances knocked its shares and bonds.

The group is pursuing a two-prong strategy to improve its debt
position, replacing commercial paper with longer term debt and
expanding its backstop credit lines.

GE Capital said yesterday that it had enlarged the credit line
because "there was strong demand and it made sense for us to
increase it".

Pricing of the new facility was not disclosed, but rates and fees
were said to be in line with those normally paid by companies
with a triple-A credit rating, the highest measure of
creditworthiness.

JP Morgan, Salomon Smith Barney and Banc of America Securities
were joint lead arrangers and joint bookrunners on the
transaction. But in a further sign of US banks' concerns about
exposure to the loan market, analysts said most of the other 26
investment and commercial banks that participated were outside
the US.

"It's a reflection that the US loan market is cautious, but this
isn't specific to GE," said Faris Khan of Loan Pricing
Corporation, which monitors the market.

Each of the lead arrangers was expected to take $1.5bn of the
facility, although that will be syndicated to other banks.

GE is one of just eight US companies to have earned a triple-A
from Moody's Investors Service. Standard & Poor's, the rival
rating agency, also rates GE a triple-A credit. GE's high rating
is an important element of GE Capital's strategy as it is able to
raise money in financial markets at favourable rates.

GE Capital's 10-year bonds are still trading more like an
AA-rated company.

But spreads over Treasury bonds have tightened since March as the
group has sought to reassure investors about its plans, and
investors have favoured high-grade

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