Moody's Joins S&P In G.E. Downgrade (GE)

Moody’s Investor Services has decided to join in on the downgrade of General Electric Co. (NYSE: GE).  This downgrade takes the unsecured debt ratings of GE itself and General Electric Capital Corp (“GECC”), and subsidiaries, down to “Aa2” from “Aaa.”  The rating of the FDIC Temporary Liquidity Guarantee Program was affirmed at Aaa.

The Prime-1 short-term ratings of both GE and GECC were affirmed.  What is more important than the downgrade here, even compared to it being a catch-up call after S&P made its cut, is that the outlook for GE and GECC ratings is stable on both entities.

Most of the risks here are also associated with the overall exposure to GECC.  The long-term risks were noted in the wholesale funding program and noted risks related to deteriorating asset quality trends.  But the other issue that takes away any near term hurdles of fear is the note that GECC will meet its 2009 objectives for improving liquidity and leverage.

Another note that is perhaps a positive here is that GE’s industrial operations were noted by Moody’s as having “strong Aaa characteristics” in the note.  Moody’s noted $2 to $3 billion in free cash flow for 2009.

GE shares are up 5%at $10.07 and have not really come off since the downgrade.  Since the rating is stable and since this was already done by S&P, this is really nothing more than just a footnote.

Jon C. Ogg
March 23, 2009