Moody's Downgrades GE's Senior Unsecured Debt Rating to A1

Outlook Stable

New York, April 10, 2015 -- Moody's Investors Service downgraded the senior unsecured debt rating for General Electric Company (GE) to A1 from Aa3, along with all other instrument ratings for GE as outlined below. The downgrades follow GE's April 10th announcement of its plan to sell approximately $200 billion of ending net investment in its wholly-owned finance subsidiary, General Electric Capital Corporation (GE Capital), and to amend its current income maintenance agreement such that GE will now provide a full and unconditional guarantee of all existing GE Capital debt (approximately $200 billion). The company's Prime-1 (P-1) short-term rating was affirmed. Separately, GE Capital's A1 senior unsecured debt rating has also been affirmed, based on the credit enhancement afforded by the provisioning of the aforementioned explicit guarantee from GE. The rating outlook remains stable.

RATINGS RATIONALE

"The downgrades reflect our perception of a growing level of financial risk tolerance, in favor of equity holders and at the expense of creditors," said Russell Solomon, Senior Vice President and Moody's lead analyst for General Electric. The pending GE Capital asset sales, with virtually all benefits inuring to equity owners, taken together with high share repurchase activity and a high dividend payout in recent periods, and the liquidity-consuming Alstom acquisition that is still pending, reflect a noteworthy shift by GE to more aggressive financial policies, according to the rating agency. "GE has been increasing cash payments to shareholders for several years but has not yet achieved a commensurate increase in operating earnings and cash flow," noted Solomon. The company had previously stated that it would exercise a degree of restraint in further increases in distributions to shareholders when it announced the Alstom acquisition. "We view the updated plan to allocate a total of about $90 billion to shareholder distributions over the next three years as a decisive indication that the company's financial policies have shifted to a more aggressive posture, which we expect to continue going forward," added Solomon.

Sustaining the company's heavy distributions to equity holders while also sustaining a credit profile that is consistent with the former rating would require stronger growth in cash flow from operations than Moody's expects over the medium term. "In fact, the reduction of earnings and dividends from GE Capital during a period of heavy investment by GE and under difficult market conditions for many of GE's industrial business lines will further undercut financial ratios that we already expected to be weaker than peers at the same rating level over the next several years, although there is an acknowledged offset in reducing the size of a much riskier portion of GE's total portfolio," said Solomon.

Moreover, the full and unconditional guarantee from GE of all existing GE Capital debt imposes additional overhang relative to the current income maintenance agreement and further exacerbates the declining leverage profile that is already heavily strained by substantially underfunded pension liabilities. The current cash consumptive stage of GE's business cycle and ongoing heavy capital spend as anticipated will continue to constrain the company's free cash flow generating capability and earnings over the next few years.

The dramatic shrinkage of GE Capital down to a group of assets approximately one-fifth of peak historical size and more closely aligned with GE industrial business lines is itself a credit positive development, notwithstanding the lower Moody's baseline credit assessment (BCA) for GE Capital (baa2 vs baa1 previously). The lower BCA principally reflects the much smaller (albeit still large) size and more concentrated nature of the GE Capital assets, which will also have weaker profitability measures and inherently more volatile earnings on a go-forward basis than the much larger current GE Capital portfolio of assets. Liquidity provisions for GE Capital have markedly improved since the financial crisis, however, along with broader risk mitigation initiatives which are expected to persist over the interim period, according to Moody's. The corresponding reduction in the sheer size of GE Capital's previously much larger wholesale funding risk exposure (and the ensuing overhang for GE) is subsequently a noteworthy offsetting credit enhancement for the industrial GE parent company.

The following summarizes Moody's rating actions:

Rating Downgrades:

..Issuer: General Electric Company

Long Term Issuer Rating, Downgraded to A1 from Aa3

Senior Unsecured domestic currency rating, Downgraded to A1 from Aa3

Senior Unsecured Shelf domestic currency rating, Downgraded to (P)A1 from (P)Aa3

Subordinated Shelf domestic currency rating, Downgraded to (P)A2 from (P)A1

....Revenue Bonds Supported by General Electric Company, Downgraded to A1 from Aa3

Rating Affirmation:

..Issuer: General Electric Company

Commercial Paper rating, Affirmed at P-1

....Revenue Bonds Supported by General Electric Company, Affirmed at VMIG 1

....Revenue Bonds Supported by General Electric Company, Affirmed at P-1

Outlook Action:

..Issuer: General Electric Company

Outlook, Stable (unchanged)

The stable rating outlook reflects Moody's expectation that GE and GE Capital will successfully execute the planned multi-year shrinkage of GE Capital, notwithstanding ongoing macroeconomic headwinds and difficult market conditions in certain industrial business segments. A consistent track record and a history of prudent management and strong industry knowledge mitigate many of the perceived execution risks associated with the transaction. The outlook also incorporates Moody's expectation that GE's industrial operations will generate improving profitability and cash flows over the next several years as the company more meaningfully benefits from ongoing restructuring and heavy capital investment activities.

Ratings could be lowered if GE fails to successfully execute the planned GE Capital asset sales and maintain strong excess liquidity and capital provisions sufficient to mitigate funding risk over the next few years, or if it fails to successfully integrate the pending Alstom asset acquisition and realize expected synergies. Ratings could also be pressured if GE experiences sustained deterioration in credit metrics, erosion in the competitive strength and cash generating ability of its industrial operations, and, more broadly, if the balance sheet weakens further from additional debt-funded acquisitions and/or the failure of GE Capital to repay principal and timely satisfy requisite interest payments on its debt and other obligations. This could be indicated by the following financial ratios: Moody's adjusted Debt-to-EBITDA above 2.5x; EBITA-to-Interest below 6.0x; Retained Cash Flow-to-Net Debt below 25% -- all on a sustained basis. Negative rating action(s) could also be considered if GE Capital's credit profile weakens due to material changes in profitability, liquidity and leverage related to the monetization of its non-core assets, or otherwise.

While not expected given GE's weakly positioned credit metrics on both a current and proforma basis, coupled with Moody's view that GE Capital's material targeted asset sales and the pending Alstom acquisition effectively constrain the company's financial flexibility at the current rating level, consideration for a positive outlook or a higher rating longer-term could follow meaningful improvement in the perceived credit risk of GE Capital and expectations of sustained improvement in liquidity and key credit metrics for the broader GE industrial credit. This could be evidenced by Moody's adjusted Debt-to-EBITDA of 1.5x or lower, Retained Cash Flow-to-Net Debt above 45%, and Free Cash Flow-to-Debt of 25% or more -- again, all on a sustained basis.

The methodologies used in these ratings were the Global Manufacturing Companies, published in July 2014, and The Rating Relationship Between Industrial Companies And Their Captive Finance Subsidiaries, published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Fairfield, Connecticut, General Electric Company's industrial operations generated revenue approximating $108 billion in the twelve-month period ended December 2014. The company is a global diversified conglomerate with heavy manufacturing operations in seven broad reporting segments: Power & Water, Aviation, Healthcare, Oil & Gas, Appliances & Lighting (note that the Appliances segment disposition is pending and is expected to be completed in the second half of 2015), Energy Management and Transportation. GE also maintains a wholly-owned finance subsidiary in Stamford, Connecticut-based General Electric Capital Corporation (A1 stable), with about $43 billion of revenue generated over the same period.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Russell D Solomon
Senior Vice President
Corporate Finance 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 P Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653