New York, March 19, 2012 -- Moody's Investors Service placed the Aa2 senior unsecured ratings
of General Electric Company (GE) and General Electric Capital Corporation
(GECC) under review for possible downgrade. The Prime-1
short-term ratings for both companies were affirmed. The
review is based on Moody's view that finance companies have higher
risks than previously considered, implying a wider gap between the
risk profiles of GECC and GE's industrial businesses. This
could result in Moody's determining that the GE and GECC ratings
should no longer be equalized.
RATINGS RATIONALE
The review is based on Moody's view that the risk profile of market-funded
financial institutions, including GECC, is higher than previously
reflected in their ratings. With a large and recurring need for
wholesale funding to support its operations, GECC is inherently
vulnerable to fluctuations in investor confidence relating to the firm's
creditworthiness and to funding conditions in the market generally.
GECC has improved its liquidity and capital levels since the onset of
the credit crisis. However, Moody's believes that these
steps are unlikely to have fully neutralized the risks associated with
the firm's funding model. The rating implications of these
structural and enduring risks are explained in Moody's revised finance
company rating methodology, which was released on March 19,
2012.
"We continue to view GECC as one of the strongest financial companies
in the world; however, our views about the credit risks of
firms in this sector that rely on confidence-sensitive funding
have changed. We will review the company's ratings in the
context of this updated sector view and will also consider GECC's
own specific credit drivers," said Moody's senior analyst
Mark Wasden.
"GE's industrial businesses continue to perform well and collectively
possess many Aaa-like credit characteristics," noted
Moody's senior vice president Russell Solomon, lead analyst
for GE. "The industrial company's Aa2 rating already
incorporates some drag on its creditworthiness due to its explicit and
implicit commitment to provide financial support to GECC if needed,"
Solomon added.
Moody's will weigh GECC's characteristic strengths in portfolio
diversification and franchise positioning against the challenges of its
wholesale funding model, while also considering the firm's
enhanced strategies for managing its liquidity and capital in light of
these challenges. Moody's will also incorporate into its
analysis factors that distinguish GECC's credit profile from other
finance companies, such as its ownership by GE and regulation by
the Federal Reserve. Finally, Moody's will consider
GE's explicit support agreement with GECC, the level of financial
support GE has provided in the past, and the degree of strategic
importance of GECC to GE's industrial businesses going forward.
Moody's ratings for GE and GECC are currently aligned at the Aa2
level, notwithstanding the distinct, and now further diverging,
credit profiles of these entities on a stand-alone basis.
Their identical ratings suggest that the existing GE support agreement
together with GE's implicit incentives to provide support to GECC
are sufficiently strong to approximately equalize the risks of holding
debt issued by either GE or GECC. The rating review, however,
will investigate whether equalization of the two companies' ratings
continues to be appropriate given Moody's view that the stand-alone
credit profiles of GE and GECC are now further apart. The conclusion
of the review, which is expected in coming weeks, could result
in a split rating outcome -- that is, the rating of GECC could
be lower than that of GE. In any case, GE's ratings
would not be lowered by more than one ratings notch (i.e.,
to Aa3) and GECC's ratings would not be lowered by more than two
rating notches (i.e., to A1).
Moody's affirmed the Aaa rating and negative outlook assigned to
debt that GECC issued under the Federal Deposit Insurance Corporation's
Temporary Liquidity Guarantee Program, reflecting the full faith
and credit of the U.S. government backing the debt.
Headquartered in Fairfield, Connecticut, General Electric
Company is a $100 billion annual industrial revenue generating
global diversified conglomerate with heavy manufacturing industrial operations
in five broad reporting segments: Energy Infrastructure, Aviation,
Transportation, Healthcare and Home & Business Solutions.
Based in Stamford, Connecticut, General Electric Capital Corporation
generated $46 billion of revenue in 2011 as GE's wholly-owned
finance subsidiary.
The principal methodology used in rating General Electric Company was
Global Heavy Manufacturing Rating Methodology published in November 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology .
The principal methodology used in rating General Electric Capital Corporation,
General Electric Capital Canada Inc., General Electric Capital
Services, Inc., GE Japan Funding K.K.,
GE Capital UK Funding, GE Capital Australia Funding Pty.
Ltd.,GE Capital Canada Funding Company, GE Capital
CFE, Inc., GE Capital European Funding, GE Capital
Franchise Finance Corporation, GE Capital New Zealand Funding,
GE Capital Sukuk Ltd, GE Capital Trust I, GE Capital Trust
II, GE Capital Trust III, GE Capital Trust IV, GE Capital
Trust V, Arden Realty Limited Partnership, Monogram Credit
Card Bank of Georgia , Security Capital Group Incorporated,
and SUSA Partnership, L.P., was the Finance
Company Global Rating Methodology published March 2012. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
Moody's current ratings on General Electric Company and its affiliates
are:
Long Term Issuer Rating of Aa2, on review for downgrade
Senior Unsecured domestic currency ratings of Aa2, on review for
downgrade
Senior Unsecured Shelf domestic currency ratings of (P)Aa2, on review
for downgrade
Subordinate Shelf domestic currency ratings of (P)Aa3, on review
for downgrade
Commercial Paper ratings of P-1, affirmed
General Electric Capital Corporation
Long Term Issuer Rating of Aa2, on review for downgrade
Senior Unsecured domestic currency ratings of Aa2, on review for
downgrade
Senior Unsecured foreign currency ratings of Aa2, on review for
downgrade
Senior Unsecured MTN Program domestic currency ratings of (P)Aa2,
on review for downgrade
Senior Subordinate domestic currency ratings of Aa3, on review for
downgrade
Subordinate domestic currency ratings of Aa3, on review for downgrade
Subordinate foreign currency ratings of Aa3, on review for downgrade
Subordinate MTN Program domestic currency ratings of (P)Aa3, on
review for downgrade
Preferred Stock domestic currency ratings of A1 (hyb), on review
for downgrade
Senior Unsecured Shelf domestic currency ratings of (P)Aa2, on review
for downgrade
Subordinate Shelf domestic currency ratings of (P)Aa3, on review
for downgrade
Junior Subordinate Shelf domestic currency ratings of (P)Aa3, on
review for downgrade
Preferred Shelf domestic currency ratings of (P)A1, on review for
downgrade
Preferred Shelf -- PS2 domestic currency ratings of (P)A2,
on review for downgrade
Commercial Paper ratings of P-1, affirmed
Other Short Term domestic currency ratings of (P)P-1, affirmed
BACKED Senior Unsecured domestic currency ratings of Aaa, affirmed
BACKED Senior Unsecured foreign currency ratings of Aaa, affirmed
BACKED Senior Unsecured Bank Credit Facility domestic currency ratings
of Aa2, on review for downgrade
BACKED Subordinate domestic currency ratings of Aa2, on review for
downgrade
General Electric Capital Canada Inc.
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured MTN Program foreign currency ratings of (P)Aa2,
on review for downgrade
BACKED Other Short Term foreign currency ratings of (P)P-1,
affirmed
General Electric Capital Services, Inc.(1)
BACKED Subordinate domestic currency ratings of Aa2, on review for
downgrade
BACKED Commercial Paper domestic currency ratings of P-1,
affirmed
(1) Debts issued by General Electric Capital Services, Inc.
were assumed by General Electric Capital Corporation
GE Japan Funding K.K.
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
BACKED Commercial Paper domestic currency ratings of P-1,
affirmed
GE Capital UK Funding
BACKED Senior Unsecured foreign currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured MTN Program foreign currency ratings of (P)Aa2,
on review for downgrade
BACKED Subordinate MTN Program foreign currency ratings of (P)Aa3,
on review for downgrade
BACKED Commercial Paper foreign currency ratings of P-1,
affirmed
BACKED Other Short Term foreign currency ratings of (P)P-1,
affirmed
GE Capital Australia Funding Pty. Ltd.
Senior Unsecured domestic currency ratings of Aa2, on review for
downgrade
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured foreign currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured MTN Program domestic currency ratings of (P)Aa2,
on review for downgrade
BACKED Senior Unsecured MTN Program foreign currency ratings of (P)Aa2,
on review for downgrade
BACKED Subordinate MTN Program foreign currency ratings of (P)Aa3,
on review for downgrade
BACKED Commercial Paper domestic currency ratings of P-1,
affirmed
BACKED Other Short Term domestic currency ratings of (P)P-1,
affirmed
BACKED Other Short Term foreign currency ratings of (P)P-1,
affirmed
GE Capital Canada Funding Company
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured MTN Program domestic currency ratings of (P)Aa2,
on review for downgrade
BACKED Senior Unsecured MTN Program foreign currency ratings of (P)Aa2,
on review for downgrade
BACKED Subordinate MTN Program foreign currency ratings of (P)Aa3,
on review for downgrade
BACKED Commercial Paper domestic currency ratings of P-1,
affirmed
BACKED Other Short Term foreign currency ratings of (P)P-1,
affirmed
GE Capital CFE, Inc.
BACKED Preferred Stock domestic currency ratings of A2 (hyb), on
review for downgrade
GE Capital European Funding
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured foreign currency ratings of Aa2, on review
for downgrade
BACKED Senior Unsecured MTN Program foreign currency ratings of (P)Aa2,
on review for downgrade
BACKED Subordinate MTN Program foreign currency ratings of (P)Aa3,
on review for downgrade
BACKED Commercial Paper domestic currency ratings of P-1,
affirmed
BACKED Other Short Term foreign currency ratings of (P)P-1,
affirmed
GE Capital Franchise Finance Corporation
Senior Unsecured MTN Program domestic currency ratings of (P)Aa2,
on review for downgrade
Senior Unsecured Shelf domestic currency ratings of (P)Aa2, on review
for downgrade
Senior Subordinate Shelf domestic currency ratings of (P)Aa3, on
review for downgrade
Subordinate Shelf domestic currency ratings of (P)Aa3, on review
for downgrade
Preferred Shelf domestic currency ratings of (P)A1, on review for
downgrade
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
GE Capital New Zealand Funding
BACKED Commercial Paper domestic currency ratings of P-1,
affirmed
GE Capital Sukuk Ltd
BACKED Senior Unsecured foreign currency ratings of Aa2, on review
for downgrade
GE Capital Trust I
BACKED Junior Subordinate domestic currency ratings of Aa3 (hyb),
on review for downgrade
GE Capital Trust II
BACKED Junior Subordinate foreign currency ratings of Aa3 (hyb),
on review for downgrade
GE Capital Trust III
BACKED Junior Subordinate foreign currency ratings of Aa3 (hyb),
on review for downgrade
GE Capital Trust IV
BACKED Junior Subordinate foreign currency ratings of Aa3 (hyb),
on review for downgrade
GE Capital Trust V
BACKED Junior Subordinate foreign currency ratings of Aa3 (hyb),
on review for downgrade
Arden Realty Limited Partnership
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
Monogram Credit Card Bank of Georgia
BACKED Long Term Bank Deposits domestic currency ratings of Aa2,
on review for downgrade
BACKED Short Term Bank Deposits domestic currency ratings of P-1,
affirmed
Security Capital Group Incorporated
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
SUSA Partnership, L.P.
BACKED Senior Unsecured domestic currency ratings of Aa2, on review
for downgrade
REGULATORY DISCLOSURES
Although the following credit ratings have been issued in a non-EU
country which has not been recognized as endorsable at this date,
these credit ratings are deemed "EU qualified by extension"
and may still be used by financial institutions for regulatory purposes
until 30 April 2012. Further information on the EU endorsement
status and on the Moody's office that has issued a particular Credit
Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the ratings for General Electric Company
are the following : parties involved in the ratings, parties
not involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, and
confidential and proprietary Moody's Analytics information.
Information sources used to prepare the ratings for General Electric Capital
Corporation, General Electric Capital Canada Inc.,
General Electric Capital Services, Inc., GE Japan Funding
K.K., GE Capital UK Funding, GE Capital Australia
Funding Pty. Ltd.,GE Capital Canada Funding Company,
GE Capital CFE, Inc., GE Capital European Funding,
GE Capital Franchise Finance Corporation, GE Capital New Zealand
Funding, GE Capital Sukuk Ltd, GE Capital Trust I, GE
Capital Trust II, GE Capital Trust III, GE Capital Trust IV,
GE Capital Trust V, Arden Realty Limited Partnership, Monogram
Credit Card Bank of Georgia , Security Capital Group Incorporated,
and SUSA Partnership, L.P., are the following
: parties involved in the ratings, public information,
and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
A member of the board of directors of this rated entity may also be a
member of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
The person who approved General Electric Company credit ratings is:
Michael Mulvaney, Managing Director - Corporate Finance,
JOURNALISTS: 212-553-0376, SUBSCRIBERS:
212-553-1653
Mark L. Wasden
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews GE,GECC ratings on revised finance co methodology
