GE Capital's Spreads Widen After Giant Bond Issue

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GE Capital's Spreads Widen After Giant Bond Issue

Five-year credit default swap protection on GE Capital, the finance arm of General Electric widened after the firm's USD11 billion global bond offering on March 13, the second largest issue in U.S. history. Credit-default protection widened about 10 basis points Wednesday hitting a high of 55bps in afternoon trading from roughly 43bps a week earlier. "The bond offering, rumors that the company is going to acquire Tyco's finance unit and the fact that GE has about USD100 million in outstanding commercial paper out there is all coming together and it just keeps widening," said one trader in New York. He added that investment banks were the most active in the market. Officials at GE Capital denied reports Wednesday that it was interested in purchasing CIT Group, the finance unit of Tyco International.

Lisa Archinow, analyst at Standard & Poor's in New York, said the rating agency's outlook on GE Capital remains stable. "Obviously the intent by GE to push out its maturities to 30-year debt is a positive. It gives the company better balance in its funding profile to have that long-term debt," she said. As part of the offering, GE sold USD5 billion of 30-year bonds. The remaining portion of the offering was divided into USD4 billion, three-year floating-rate notes and USD2 billion in five-year notes.

S&P has assigned a triple A rating to GE's bond offering.

 

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