Re: [A-List] GE: Reshaing the balance sheet

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

This is a continuation of an earlier strategy to cope with GE's
difficulty with the commercial papers market with increased bank
credits.  GE is already a dead horse.  The only question is when the
smell of rotten flesh will overwhelm the market, by October? A lot of GE
financed telecom are falling like flies, the latest is Velocita which
file for Chapter 11 yesterday.
http://www.xchangemag.com/hotnews/25h164456.html
GE's energy derivative trading operation is a total meltdown.
When AT&T debt is downgarded to junk status, can GE remain healthy?

Henry C.K. Liu

Henry C.K. Liu

Sabri Oncu wrote:

> 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.
>
> Full at:
> http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/
> FullStory&c=StoryFT&cid=1021991179838&p=1012571727088
>
> +++++++++++++
>
> 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
>
> Full at:
> http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/
> FullStory&c=StoryFT&cid=1021990984049&p=1012571727088