S&P downgrades the debt of financially troubled GE and GE Capital
On October 30th, 2018, Standard & Poor’s (S&P) downgraded General Electric (GE) and its financial arm, GE Capital, further into junk status. This move by the credit rating agency comes as a blow to the once-iconic American conglomerate, which has been struggling with massive debt and declining business performance in recent years.
GE’s credit rating was lowered from BBB+ to BBB-, just one notch above junk status, while GE Capital saw its rating drop from BBB- to BB+. This downgrade reflects S&P’s concerns about GE’s ability to reduce its debt load, which currently stands at around $115 billion.
The downgrades also highlight the challenges facing GE as it tries to turn its business around. The company has been hit hard by a series of missteps, including overly aggressive acquisitions and underperforming businesses. In an effort to improve its financial position, GE has been selling off assets and restructuring its business, but the road ahead remains uncertain.
For GE Capital, the downgrade raises concerns about its ability to support the larger GE conglomerate. The financial arm has been a key source of funding for GE’s operations, but its weakening credit rating could make it more difficult for the company to raise capital in the future.
The downgrade by S&P is likely to have a ripple effect on GE, making it more expensive for the company to borrow money and potentially dampening investor confidence in its ability to weather the storm. GE’s stock price has already been on a downward trend, and this latest news is likely to add further pressure.
Despite the challenges facing GE, the company’s new CEO, Larry Culp, has expressed confidence in its ability to overcome its current difficulties. Culp, who took over the reins in October 2018, has promised to implement a more focused strategy and improve transparency in the company’s financial reporting.
While the downgrade by S&P is a setback for GE, it also serves as a wake-up call for the company to address its debt and operational issues head-on. The road ahead may be rocky, but with a renewed focus on efficiency and profitability, GE may be able to regain its footing and emerge stronger in the future.
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