GE purchases Avio's aviation business for $4.3 billion; Goldman, Wells Fargo notes trade wider

By Sheri Kasprzak and Aleesia Forni

New York, Dec. 21 - New issue activity for the investment grade market continued to stagnate ahead of the holiday season with very limited action on Friday.

Spreads in the secondary market were wider on the day following heightened concern over the U.S. fiscal cliff.

The Markit CDX Series 18 North American Investment Grade index widened 3 basis points at a spread of 93 bps at Friday's close.

Bank and financial paper, which had performed well over the course of the week, was 5 bps to 10 bps wider.

Goldman Sachs' 5.75% notes, which sold at a spread of 380 bps over Treasuries on Jan. 19, were trading 10 bps wider at 165 bps bid near the end of the session.

Tuesday's deal from Wells Fargo & Co. also widened on Friday, trading 9 bps weaker from levels seen Thursday.

A trader quoted the $1.25 billion of 1.5% five-year notes at 78 bps bid, 73 bps offered.

The notes were trading at 69 bps bid, 68 bps offered on Thursday.

The San Francisco-based financial services company sold the notes with a spread of Treasuries plus 78 bps on Tuesday.

GE purchase

Meanwhile, in corporate news, General Electric said on Friday that it purchased the aviation business of Italian aircrafts parts manufacturer Avio. GE spent $4.3 billion to buy the segment from private equity firm Cinven, said Jody Lurie, corporate credit analyst with Janney Montgomery Scott LLC.

"The acquired segment generated $2.4 billion in 2011 revenues, of which over 50% came from GE and GE joint venture engines, and $506 million in EBITDA. GE has been expanding its aviation business as part of its larger goal to grow its industrial side, while shrinking finance sub GE Capital, given what happened during the recession," Lurie said Friday.

"As the third-largest segment behind energy infrastructure and GE Capital, the aviation division comprised about 13% of LTM revenue, along with 16% of LTM EBIT.

The acquisition also helps GE put overseas cash to work, as it recorded $13 billion in 'indefinitely reinvested cash' pegged for funding growth in non-U.S. subs, as part of the $54.8 billion in cash held overseas by GE and GE Capital at 3Q end," Lurie stated.

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