GE supports GE Capital debt, no extra GE Capital bonds for five years

New York, April 10 – General Electric Co. said it will guarantee all tradable senior and subordinated debt securities issued or guaranteed by General Electric Capital Corp.

In addition, GE said that it does not expect GE Capital to issue “incremental” long-term debt for “at least five years.”

GE made the announcements Friday morning as part of the unveiling of a plan to sell most of GE Capital’s assets.

The aim is to “create a simpler, more valuable company by reducing the size of its financial businesses” and “by focusing on continued investment and growth in its world-class industrial businesses,” GE said in a news release.

As an initial step, GE announced $26.5 billion of transactions, including an agreement to sell the bulk of the assets of GE Capital Real Estate to funds managed by Blackstone. Wells Fargo will acquire a portion of the performing loans at closing, and GE has letters of intent with other buyers for an additional $4 billion of commercial real estate assets.

The strategy to downsize the financial businesses is intended to be one that “works for GE and for GE Capital Corp. debtholders and GE shareholders,” the company said.

GE Capital will be merged into GE and a new intermediate holding company will be created for the GE Capital businesses.

GE Capital’s tradable senior and subordinated debt securities and its commercial paper will be guaranteed through an amendment to the income maintenance agreement that was executed on Friday.

The guarantee will replace the current income maintenance covenant and applies to $210 billion of debt, according to an 8-K filing with the Securities and Exchange Commission.

GE said it “will maintain substantial liquidity and capital through the transition.”

In addition to not issuing incremental GE Capital long-term debt, commercial paper will be further reduced to about $5 billion by the end of 2015.

GE is a Fairfield, Conn.-based industrial manufacturer.

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