A $12 Billion Shelf Filing from GE Capital (GE)

General Electric Capital Corporation, the hard-hit and recently criticized unit of General Electric Company (NYSE: GE), has just filed an automatic shelf registration with the SEC.  Usually these  are just normal operating procedures for companies as they have set times and they expire.  But this filing is for Variable Denomination Floating Rate Demand Notes, to the tune of $12,000,000,000.00.

As with all shelf registrations, the securities may be offered separately or together in any combination and as separate series.  Also, as with most of these automatic shelf registrations, no underwriters were named.  As far as the USE OF PROCEEDS, these funds are to be added to the general funds of GE Capital and will be available for financing its operations.

As noted in the prospectus, GE Capital’s ratio of earnings to fixed charges declined to 0.97:1 in the first quarter of 2009 due to lower pre-tax earnings which were primarily driven by higher provisions for losses on financing receivables in connection with the challenging economic environment.   In 2004 that was ratio of earnings to fixed charges was 1.82.  In 2005 it was 1.66, in 2006 it was 1.63, in 2007 it was 1.56, and in 2008 it was 1.24.

As of March 31, 2009, the amount of earnings needed to achieve a one-to-one  ratio of earnings to fixed charges was $154 million. General Electric made a $9.5 billion capital contribution to General Electric Capital Services, Inc. in the first quarter of 2009 (of which $8.8 billion was further contributed to GE Capital through capital contribution and share issuance) to improve tangible capital and reduce leverage and General Electric Company does not anticipate additional contributions in 2009.

GE Capital is one of the reasons that an analyst was out with a “GE is worth $2.00” call.  We still can’t even fathom what a “GE at $2.00” would translate to in the market as a whole, but the answer is that it wouldn’t be pretty.

The full prospectus is here on file with the SEC.

Two supplemental filings have already come in.  These were two for $11,000,000,000 in Variable Denomination Floating Rate Demand Notes and another $1,000,000,000 in Variable Denomination Floating Rate Demand Notes.  Both supplemental prospectus items listed Huntington National Bank as the Agent Bank, but no underwriters were seen.

Jon C. Ogg
July 9, 2009