General Electric is cut to AA+ by S&P

Read it at Alphaville:

Standard & Poor’s Ratings Services today lowered its long-term ratings on General Electric Co. (GE) and units, including General Electric Capital Corp. (GECC), by one notch to ‘AA+’ from ‘AAA’. We affirmed the ‘A-1+’ short-term credit ratings. The outlook is stable.

The main factor in the downgrade was our assessment of the stand-alone credit profile of financial services unit GECC, which we now view as ‘A’, compared to the ‘A+’ we had indicated before.

“We believe that GECC is under increasing earnings pressure, due to the recent sharp deterioration in general economic conditions around the globe,” said Standard & Poor’s credit analyst Robert Schulz.

“This will result, in our opinion, in rising credit losses across key segments of GECC’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. We do not anticipate that GE will benefit from any meaningful earnings or cash flow from GECC through 2010.”

Let’s be honest, GE is a financial institution – a private equity firm, if you will. It was laughable that they were rated AAA even after they cut their dividend. All of this was well known. Read my takes on their dividend and their prospects.

GE Capital’s looming time bomb

Why is General Electric paying a dividend of 10%?

Let’s hope Immelt can get this ship righted now that the pressure to preserve the AAA rating is no longer there.

Source
S&P downgrades GE – FT Alphaville