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Rating Action:

Moody's assigns an A1 rating to GE Capital EFS Financing Inc.

06 Nov 2015

New York, November 06, 2015 -- Moody's Investors Service assigned an A1 Issuer rating to GE Capital EFS Financing Inc. (EFS Financing) with a stable rating outlook. Moody's also expects to assign Issuer ratings of A1 and Prime-1 to GE Capital Global Holdings, LLC (Global Holdings), pending a forthcoming corporate reorganization of current parent General Electric Capital Corporation (GECC, A1 stable). The ratings of GECC and ultimate parent General Electric Company (GE, A1 stable) are not affected by the rating actions.

RATINGS RATIONALE

The A1 rating assigned to EFS Financing, a US energy sector lender, is based on the irrevocable and unconditional guarantee of GECC and planned subsequent assignment of the guarantee to Global Holdings. In a corporate reorganization expected to occur by year end, GECC will be merged into GE and Global Holdings will become the new holding company of GE's finance operations. The A1 rating Moody's expects to assign to Global Holdings is based on strong anticipated support from ultimate parent GE, as well as the baa2 stand-alone credit profile of the company's consolidated lending and leasing businesses.

A key aspect of GE's support is its agreement to provide Global Holdings $45 billion of borrowing capacity, reducing to around $20 billion by the end of 2016. On written request from Global Holdings, GE will borrow under its available committed bank credit facilities and on-lend the amounts to Global Holdings, without any restrictions regarding use of the funds. The agreement is unconditional and irrevocable. GE also guarantees over $150 billion of tradable debt issued by GECC and its funding subsidiaries, which will become subsidiaries of Global Holdings when GECC merges with GE. Moody's expects that GE will support future debt issued by Global Holdings and its subsidiaries, either through a guarantee or support agreement, though the company doesn't anticipate needing to borrow until after 2019.

GE has exhibited strong support of its finance company historically, including through capital injections, indemnifications, and debt guarantees. Though GE is reducing the size of its finance operations, the businesses it will retain are better aligned with GE's industrial-focused strategy, which Moody's believes contributes to GE's willingness to support the operations. Should GE's support of Global Holdings' decline, either because it reduces Global Holdings' committed credit availability to less than $20 billion or institutes weaker than anticipated support of future debt issuance, Moody's could reduce Global Holdings' rating.

Global Holdings' Baa2 stand-alone profile incorporates GE's significant downsizing of its finance businesses, the franchise positioning and operating strength of its retained businesses, and the company's liquidity and capital strength. Asset sales totaling approximately $200 billion by the end of 2016 will reduce the contribution of GE's finance operations to GE's consolidated earnings to 10%, down from 42% in 2014. GE's continuing finance businesses include leading aircraft financier GE Capital Aviation Services, Energy Financial Services, and Healthcare Equipment Finance, which leverage the expertise of GE's industrial businesses. Continuing operations also include Working Capital Solutions, a captive operation that factors GE customer receivables.

After the downsizing, GE's finance company will have a smaller risk footprint and significantly reduced reliance on the capital markets to fund its operations, but increased asset concentration and potentially higher earnings volatility. Additional risks to Global Holdings' credit profile include execution risk associated with remaining transition tasks and performance risks related to both core and non-core operations. Risks are mitigated by the company's strong liquidity profile, which will be sustained by significant cash generated from sale of assets. The finance unit's smaller scale will reduce the risks associated with its wholesale funding profile, for both itself as well as for GE. The company intends to maintain a strong capital position, with a target Common Equity Tier 1 ratio of 14%.

The upcoming corporate reorganization will not affect GE's existing unconditional and irrevocable guarantees of the tradable debt of GECC's international funding subsidiaries, which will become subsidiaries of GE Capital International Holdings, a new subsidiary of Global Holdings. GECC's remaining GE-guaranteed debt will be assumed by GE at the time of the merger of GECC into GE.

An upgrade in the ratings of GECC and Global Holdings is not anticipated. A downgrade could result from a weakening of GE support, reflected in a reduction in committed credit availability to less than $20 billion or weaker than anticipated support of future debt issuance. Weaker liquidity or a material increase in leverage, a decline in profitability or reversal of asset quality improvements for a sustained period of time, or a downgrade of GE's ratings could also contribute to a ratings downgrade.

The principal methodology used in these ratings was Finance Companies published in October 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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.

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 assigns an A1 rating to GE Capital EFS Financing Inc.
No Related Data.
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