Daily News: April 4, 2012

Moody’s Downgrades GE Due to GE Capital’s Higher Risk Profile

Moody’s Investors Service said it downgraded the senior unsecured debt rating of GE to Aa3 from Aa2 and the senior unsecured rating of GE Capital to A1 from Aa2. Moody’s affirmed the Prime-1 ratings of both companies. The rating outlook for GE and GECC is stable.

The downgrades result from the implementation of Moody’s revised global rating methodology for finance companies and reflect in particular the impact of GE Capital’s higher risk profile on GE. Moody’s believes the risk profiles of market-funded financial institutions, including GE Capital, are higher than was previously reflected in their ratings.

While GE Capital has improved its liquidity and capital levels since the onset of the credit crisis, Moody’s believes that, notwithstanding these positive steps, there remain material risks associated with the firm’s funding model. Moody’s therefore revised its view of GE Capital’s standalone credit profile to Baa1 from A2. The rating implications of these structural and enduring risks are explained in Moody’s revised finance company rating methodology, which was released on 19 March 2012.

With a senior debt rating of A1, GE Capital is now rated one-notch lower than GE but three notches higher than its Baa1 standalone profile. This reflects Moody’s view that support from GE is highly likely but not certain in the absence of a guarantee. To lift GE Capital’s rating further from its standalone credit profile and equalize it with GE’s rating would require a higher degree of support certainty.

To read the full Moody’s report. click here.