Sure thing. GE Places 11 Billion Bond issue--Largest Ever for a US corporation. Wow there 3 year floating rate note is only 12.5 basis points over Libor... very small spread on that. GE Capital is Triple AAA rated, I did not realize that.
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GE Capital Sells Largest Issue
Ever Denominated in U.S. Dollars
By RICHARD A. BRAVO
DOW JONES NEWSWIRES
NEW YORK -- General Electric Co.'s GE Capital unit sold the largest-ever U.S. dollar-denominated domestic corporate bond issue, totaling $11 billion.
The offering included three parts: $4 billion of three-year floating-rate notes paying a coupon of 0.125 percentage point over three-month Libor; $2 billion of 5.375%, five-year notes priced to yield 0.80 percentage point over Treasurys; and $5 billion of 6.75%, 30-year bonds priced to yield 1.09 percentage point over Treasurys.
The issue was increased from an initial size of $6 billion. The 30-year maturity gathered a considerable amount of demand, in part because GE Capital doesn't have outstanding 30-year securities, investors said. That maturity of Wednesday's deal will act as a benchmark for the company, according to investors.
GE Capital's five-year drew about $4 billion in demand, while the 30-year portion drew around $9.5 billion in interest, people familiar with the issue said.
"There's a huge amount of cash out there looking for relative safe havens in the corporate market, so it's not surprising that a <high-quality, infrequent, long-end issuer would be well-received," said Sid Bakst, portfolio manager at Weiss, Peck & Greer, New York.
"The [new issue] calendar is brimming right now at a time when the equity markets are a little bit jittery and uncertain," Mr. Bakst added. "When there is uncertainty in lower-rated and speculative names, people flock for a safer name like this."
GE Capital carries triple-A ratings from both Moody's Investors Service and Standard & Poors.
Marissa Moretti, spokeswoman for GE Capital, said the market was attractive to the company as well.
"Absolute yield levels are at historic lows, and investor demand for long-term debt from high quality issuers is strong, so we think now is the right time to be doing an offering like this," Ms. Moretti said.
With around $150 billion in short-term debt outstanding at the end of 2001, GE Capital is likely to be using the proceeds of Wednesday's offering to extend the maturities of some of its borrowings, according to analysts.
Reliance on short-term funding has proven dangerous for a number of highly rated companies over the past few months. That is because a lapse in investor confidence can cause a company to be shut out of the commercial paper market.
These liquidity crises have grown more frequent in the wake of the Enron Corp. debacle. In fact, analysts say GE went out of its way to distance its financial profile from that of Enron when it issued a beefed-up annual report Friday.
But while analysts and investors applauded the company's efforts, all those questions haven't been answered, some contended. "Although we view GE Captial as a triple-A credit ... there is food for thought in the 10-K for anyone inclined to nervousness in an age of Enron and myriad other fallen angels," Kathy Shanley, an analyst with the research firm Gimme Credit, wrote in a report Wednesday.
Fallen angels are speculative-grade rated companies that lost their investment-grade credit rating.
Among the complex issues that investors have been left pondering in the wake of GE's voluminous annual report are its obligations regarding special-purpose vehicles that issue asset-backed commercial paper. These entities, which held $43 billion in assets at the end of 2001, hold GE Capital equipment, real estate, credit-card receivables, trade receivables and other assets.
GE Capital would be required to provide liquidity support for the SPEs if GE Capital's rating falls below a Moody's rating of double-A-3 and a Standard & Poor's rating of double-A-minus, GE Capital said in the recently released annual report.
While Ms. Shanley believes a crisis of confidence regarding GE is unlikely, some in the market have drawn comparisons between GE and acquisitive conglomerate Tyco International, which was shut out of the commercial paper market.
WorldCom, which sold $10.2 billion of debt last May, previously held the title for the largest U.S. corporate issue, according to Thomson Financial.
J.P. Morgan Chase, Lehman Brothers and Salomon Smith Barney led GE Capital's offering.
"The market overall has a very positive tone so there is demand in general, and what GE was offering the market is what they wanted," said James Merli, a managing director at Lehman. "It's filling a void that has been created by a lack of issuance by other high quality issuers." |
