New York, October 02, 2018 -- Moody's Investors Service ("Moody's") placed the
ratings of General Electric Company ("GE") and GE Capital
Global Holdings, LLC ("GE Capital") and its subsidiaries
on review for downgrade, including the A2 senior unsecured debt
rating and the P-1 short-term rating. A potential
downgrade of the long-term ratings of GE and GE Capital may not
be limited to one notch. Moody's intends to address this
review within the next few weeks.
RATINGS RATIONALE
This rating review was prompted by GE's announcement that,
due to weaker performance in the Power business, the company will
fall short of its guidance for free cash flow and EPS for 2018 and that
it expects to take a goodwill impairment charge related to the Power business
that is likely to constitute substantially all of Power's current
goodwill balance of approximately $23 billion. The change
in GE's CEO and chairman was an additional consideration for the
review.
Among the range of issues that Moody's will consider is the impact
on GE's earnings and cash flow prospects of the continuing deterioration
in its Power business, which is likely to persist for some time.
The dimmer prospects for GE Power take on heightened importance given
the loss of free cash flow from GE's planned divestitures,
including the highly cash generative GE Transportation and GE Healthcare.
Moody's will also consider the options available to GE to alleviate
the ensuing pressure from the diminished cash flows, which would
be incremental to the already announced restructurings, portfolio
actions and planned debt reductions, and will weigh the likelihood
and the timing of implementing any actions. These could include
further cost reduction initiatives and incremental debt reduction from
the disposition of (i) a portion of GE's 62.5% ownership
interest in Baker Hughes, a GE Company, LLC, (ii) shares
of Westinghouse Air Brake Technologies Corp., or any residual
interest in GE Healthcare following the planned spin-off of that
unit, or (iii) any other assets. Form and timing of the asset
sales will be considered.
The review will also assess other measures that could improve GE's
free cash flow relative to its debt balance. These could include
measures to address the very substantial pension deficit, GE's
$4.2 billion annual dividend, improving working capital
or investing efficiency. The potential for disruption, or
acceleration, of efficiency programs already underway with another
change at senior management level will be assessed.
Prior to placing the ratings under review, GE's ratings incorporated
Moody's expectation that over time GE's financial performance
and capital structure would steadily become more aligned with its A2 senior
unsecured rating after successfully executing its restructuring efforts
and completing its portfolio actions, while materially decreasing
its outstanding indebtedness. The ratings reflect the company's
significant scale, competitive presence, its vast installed
base and order backlog, balanced against currently very elevated
leverage and tempered cash flows. The ratings could be downgraded
if Moody's expects that the company is unable to maintain EBITA
margins of more than 15%, to improve retained cash flow/net
debt to at least 20% and to lower debt/EBITDA to 2.5 times.
The following ratings were affected:
On Review for Downgrade:
..Issuer: General Electric Company (inclusive of debt
originally issued by General Electric Capital Corporation and certain
of its subsidiaries, assumed by General Electric Company)
....Commercial Paper, Placed on Review
for Downgrade, currently P-1
....Issuer Rating, Placed on Review
for Downgrade, currently A2
....Subordinate Shelf, Placed on Review
for Downgrade, currently (P)A3
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)A2
....Preferred Shelf, Placed on Review
for Downgrade, currently (P)Baa1
....Pref. Stock Non-cumulative
Preferred Stock, Placed on Review for Downgrade, currently
Baa1
....Senior Secured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A2
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently A3
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently A2
....Senior Subordinated Regular Bond/Debenture,
Placed on Review for Downgrade, currently A3
..Issuer: Security Capital Group Incorporated
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A2, Rating Under
Review From Negative
..Issuer: Montgomery (City of) AL, Industrial
Devel Bd
....Senior Unsecured Revenue Bonds,
Placed on Review for Downgrade, currently A2
....Senior Unsecured Revenue Bonds,
Placed on Review for Downgrade, currently VMIG 1
..Issuer: New York State Environmental Facilities
Corp.
....Revenue Bonds, Placed on Review
for Downgrade, currently A2
....Revenue Bonds, Placed on Review
for Downgrade, currently P-1
....Senior Unsecured Revenue Bonds,
Placed on Review for Downgrade, currently A2
....Senior Unsecured Revenue Bonds,
Placed on Review for Downgrade, currently P-1
..Issuer: Upper Illinois River Valley Dev.
Authority
....Senior Unsecured Revenue Bonds,
Placed on Review for Downgrade, currently A2
Outlook Actions:
..Issuer: General Electric Company
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Security Capital Group Incorporated
....Outlook, Changed To Rating Under
Review From Negative
Affected ratings of GE Capital and its subsidiaries:
On Review For Downgrade:
..Issuer: GE Capital Australia Funding Pty.
Ltd.
....Subordinate Medium-Term Note Program,
Placed on Review For Downgrade, currently (P)A3
....Senior Unsecured Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)A2
....Other Short Term Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)P-1
....Senior Unsecured Regular Bond/Debentures,
Placed on Review For Downgrade, currently A2, Rating Under
Review From Negative
..Issuer: GE Capital Canada Funding Company
....Senior Unsecured Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)A2
....Senior Unsecured Regular Bond/Debentures,
Placed on Review For Downgrade, currently A2, Rating Under
Review From Negative
..Issuer: GE Capital EFS Financing Inc.
....Issuer Rating, Placed on Review
For Downgrade, currently A2
..Issuer: GE Capital European Funding
....Subordinate Medium-Term Note Program,
Placed on Review For Downgrade, currently (P)A3
....Senior Unsecured Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)A2
....Other Short Term Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)P-1
....Commercial Paper, Placed on Review
For Downgrade, currently P-1
....Senior Unsecured Regular Bond/Debentures,
Placed on Review For Downgrade, currently A2, Rating Under
Review From Negative
..Issuer: GE Capital Global Holdings, LLC
....LT Issuer Rating, Placed on Review
For Downgrade, currently A2
....ST Issuer Rating, Placed on Review
For Downgrade, currently P-1
..Issuer: GE Capital International Funding Company
....Senior Unsecured Regular Bond/Debentures,
Placed on Review For Downgrade, currently A2
..Issuer: GE Capital Treasury Services (U.S.)
LLC
....Commercial Paper, Placed on Review
For Downgrade, currently P-1
..Issuer: GE Capital UK Funding
....Subordinate Medium-Term Note Program,
Placed on Review For Downgrade, currently (P)A3
....Senior Unsecured Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)A2
....Other Short Term Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)P-1
....Commercial Paper, Placed on Review
For Downgrade, currently P-1
....Senior Unsecured Regular Bond/Debentures,
Placed on Review For Downgrade, currently A2, Rating Under
Review From Negative
..Issuer: General Electric Capital Canada Inc.
....Senior Unsecured Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)A2
....Other Short Term Medium-Term Note
Program, Placed on Review For Downgrade, currently (P)P-1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review For Downgrade, currently A2, Rating Under
Review From Negative
Outlook Actions:
..Issuer: GE Capital Australia Funding Pty.
Ltd.
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital Canada Funding Company
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital EFS Financing Inc.
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital European Funding
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital Global Holdings, LLC
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital International Funding Company
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital Treasury Services (U.S.)
LLC
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: GE Capital UK Funding
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: General Electric Capital Canada Inc.
....Outlook, Changed To Rating Under
Review From Negative
The methodologies used in rating General Electric Company, General
Electric Capital Corporation, GE Capital Franchise Finance Corporation,
General Electric Capital Services, Inc., Security Capital
Group Incorporated, SUSA Partnership, L.P.,
Montgomery (City of) AL, Industrial Devel Bd, New York State
Environmental Facilities Corp. and Upper Illinois River Valley
Dev. were Global Manufacturing Companies published in June 2017,
and Captive Finance Subsidiaries of Nonfinancial Corporations published
in December 2015. The principal methodology used in rating GE Capital
Global Holdings, LLC, GE Capital Australia Funding Pty.
Ltd, GE Capital Canada Funding Company, GE Capital EFS Financing
Inc., GE Capital European Funding, GE Capital International
Funding Company, GE Capital Treasury Services (U.S.)
LLC, General Electric Capital Canada Inc., and GE Capital
UK Funding was Finance Companies published in December 2016. Please
see the Rating Methodologies page on www.moodys.com for
a copy of these methodologies.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The below contact information is provided for information purposes only.
Please see 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
the ratings.
The person who approved General Electric Company, Security Capital
Group Incorporated, GE Capital Franchise Finance Corporation,
General Electric Capital Corporation, General Electric Capital Services,
Inc., SUSA Partnership L.P., Montgomery
(City of) AL, Industrial Devel Bd, New York State Environmental
Facilities Corp, and Upper Illinois River Valley Dev. Authority
credit ratings is Robert Jankowitz, MD-Corporate Finance,
Corporate Finance Group, 1-212-553-0376,
1-212-553-1653. The person who approved GE
Capital Australia Funding Pty. Ltd., GE Capital Canada
Funding Company, GE Capital EFS Financing Inc., GE
Capital European Funding, GE Capital Global Holdings, LLC,
GE Capital International Funding Company, GE Capital Treasury Services
(U.S.) LLC, GE Capital UK Funding, and General
Electric Capital Canada Inc. credit ratings is Ana Arsov,
MD - Financial Institutions, Financial Institutions Group,
1-212-553-0376, 1-212-553-1653.
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.
Rene Lipsch
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Robert Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Mark Wasden
VP-Sr Credit Officer
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD-Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
