Standard & Poor”™s cut its rating on debt of Fairfield-based General Electric Co, stripping GE of its long-prized AAA rating on long-term debt and assigning a rating of AA-plus with a stable outlook.
Standard & Poor”™s cut GE Capital”™s rating to A, down from A-plus.
“We believe that (GE Capital) is under increasing earnings pressure, due to the recent sharp deterioration in general economic conditions around the globe,” said Robert Schulz, a credit analyst with Standard & Poor”™s, in a prepared statement. “This will result, in our opinion, in rising credit losses across key segments of (GE Capital”™s) finance portfolio. Still, we believe that GE”™s industrial-based cash generation capabilities remain fundamentally strong ”“ even in the face of enormous global economic headwinds ”“ and that it will generate growing cash balances from current levels over the next two years.”
In an interview with CNBC this month, GE chief financial officer Keith Sherin said the company expects GE Capital to be profitable in the first quarter and for the full year in 2009.
“Under any scenario that I can see, it”™s not going to have an operational impact on us,” Sherin told CNBC in early March, after being asked a question on the impact of any ratings cut. “The actions we have taken have certainly helped ”¦ in making the company stronger. Clearly raising capital, cutting the dividend was a tough decision for us but it was the prudent thing to do. If you just look at the savings on the dividend, the cash flow and capital we retain in the company over the next 18 months, you know, it”™s $14 billion.”
