Ratings agency Standard & Poor’s has cut General Electric Co.’s top debt rating over fears of rising loan losses and lower earnings at the conglomerate’s lending arm.
S & P lowered GE’s rating from 'AAA' to 'AA+' Tuesday, a one-notch reduction. The long-expected move means it will be more expensive for GE to raise money in the credit markets. S & P also considers GE a stable outlook.
The Fairfield, Conn-based company, whose wide-ranging businesses include jet engines, the NBC network, and loans for energy projects, was one of just six non-financial companies that hold the top rating from S & P. GE was first given the 'AAA' rating in 1956.
S & P said that the finance unit, GE Capital, faces higher losses on its loans in areas such as real estate as the global financial crisis worsens. If it stood on its own, the ratings agency would give GE Capital a much lower 'A' rating.
Company CEO Jeff Immelt has long said defending the top rating was a priority for GE. But recently, the company has worked to restructure GE Capital, lower its debt and conserve cash through steps that included a 68-percent cut of its dividend.
GE has raised $48 billion in cash this year, which represents most of its long-term debt needs for 2009. It has also taken part in a federal plan that allows companies to borrow with the backing of the government’s top credit rating.
“We will continue to run GE with the disciplines of a Triple-A company,” Immelt said in a statement today.
Company shares rose $1.09 to $9.58 in midday trading.