GE seeks urgent asset sales as bond fears rise

NEW YORK: General Electric Co will sell assets with “urgency” to reduce its high debt, Chief Executive Officer Larry Culp said, as GE shares tumbled as much as 10 per cent and the cost of insuring its debt hit a six-year high.
Culp is facing tough questions about GE’s financial strength and profit outlook after being named CEO on October 1 with a mandate to turn around the 126-year-old conglomerate.
“We have no higher priority right now than bringing leverage levels down,” Culp told CNBC. “We have plenty of opportunity to do that through asset sales.” Culp said GE also was trying to get “a better grounding in reality” in its ailing power unit.
Last month, GE posted a quarterly loss of $22.8 billion, cut its annual dividend to just 4 cents a share and told investors it was facing a deepening federal accounting probe.
The power unit lost $631 million in the quarter and GE wrote down $22 billion in goodwill because expected future profits in the unit now appear unlikely.
Since then, some analysts have questioned GE’s liquidity and slashed their target prices for the stock. Culp said he thought the power business was “getting close” to bottoming out after more than a year of declining revenue and profit.
Some GE bonds are now trading far below par, and its five-year credit default swap rose to a bid price of 176.5 basis points and the upfront price to 3.4 per cent on Monday, according to data from IHS Markit and Refinitiv.
The spike in credit default swap costs comes as short positions in GE debt have risen to $958 million from $238 million in December 2017.
The most shorted debt security is the 5 per cent perpetual bond, which has no maturity date, and has seen short positions more than double to $442 million from mid-September. — Reuters