The cost of insuring GE Capital's debt through credit-default swaps declined on Friday, according to Phoenix Partners Group. They have traded as high as $38.52 over the past 52 weeks. Earlier this week they hit an 18-year low of $5.87. GE shares rose 36 cents to $7.02 on the New York Stock Exchange.
A far deeper cut, to BBB+ would mean another $2.9 billion payment. If its rating was lowered further, to A+, Winoker estimated GE would be on the hook for an $8.2 billion collateral call. GE's chief financial officer and noted bond investor Dan Fuss of Loomis Sayles said on Thursday they believed any cut to GE's rating would keep the company in the double-A range. Many on Wall Street expect Moody's Investors Service and Standard & Poor's to cut GE's triple-A. GE, which also runs the NBC Universal media business, has not provided a numeric per-share profit target for the year, instead setting out a framework that allows for a drop in profit at GE Capital but modest growth at its big infrastructure businesses.Īnother question facing GE is what will happen to its current top-notch credit rating. Merrill Lynch cut its 2009 profit target for the Fairfield, Connecticut-based company to $1.16 per share, below his prior view of $1.32 but more in line with Reuters Estimates of $1.19, which would represent a roughly 38 percent drop on a per-share basis, excluding unusual items. Investors cannot assume that the risks of a future government bailout of GE Capital are zero, Inch wrote. government would step in to block a bankruptcy filing or a spin-off, given the lender's huge role in the U.S. He noted that if GE Capital did face a funding crisis, he believed it would be likely the U.S. But he warned that if that changes, GE may it find it difficult to raise substantial money in equity markets due to its low stock price. Inch, of Merrill Lynch, wrote that he considered it unlikely GE would have to raise additional capital - a step the company has repeatedly said it regards as unlikely. We think such write-downs, if needed, would be spread over several years, which will lessen the need for equity raises, but will hurt long-term earnings, Winoker wrote.
He estimated that parts of GE could be overestimating the value of some of its assets - for example, he calculates that its real estate equity is worth about $20 billion, rather than the $32.7 billion GE estimated it at the end of the year.
0 kommentar(er)
