GE (GE) sent the following note to the investment community today addressing rumors and concerns in the market. Here is the thing, because of recent erroneous statements by the company and management, few will put much faith in this.
GE sent out this investor update:
“To the Investment Community:
Recently claims have been made that GE will be required to raise new capital near term. This is pure speculation, is inaccurate and is not based on any input from our company.
GE has acted aggressively during the current global economic crisis to strengthen our capital base and significantly increase sources of liquidity at GE Capital.
GE has a balanced portfolio of businesses and broadly diversified assets in terms of class, customer and geographic distribution. We are well positioned to weather this downturn.
Below are facts that address this recent speculation directly:
– GE has a stronger capital position with ample liquidity
– With the 1st quarter $9.5 billion capital contribution, GE will have contributed $15 billion of capital into GECS over the last 6 months. GECS will have $63 billion of total equity, $34 billion of tangible equity and $36 billion of cash.
– As a result, GECS ratio of tangible common equity to tangible assets is 5.3%, which compares very favorably to other financial service institutions.
– Reducing the GE dividend in 2H ’09 will result in $4.4 billion in incremental cash in the second half of 2009 and about $9 billion annually.
– As committed in December, we have further reduced our commercial paper to $60 billion and have completed 71% of our ‘09 long term debt issuances.
– We have de-levered our balance sheet. Our debt/equity ratio will decrease from 8 to 1 to 6 to 1 (including hybrid debt).
– We have ~$70 billion of remaining capacity under the TLGP and ~$98 billion of access to the CPFF if necessary.
Currently, we have no plans to raise additional equity. In the unexpected event that GE Capital requires additional equity, we have a number of options to satisfy that need without seeking external capital.
We have stressed our financial service portfolios and do not see the need to raise additional capital. We plan to present results of these tests at our upcoming earnings webcast to further demonstrate the quality of our portfolio and ability to absorb potential losses in this difficult environment. Over the last several months we have significantly increased disclosure regarding our financial services businesses. We are committed to continue to enhance disclosure and transparency for our investors in the future.
We know these are challenging times, please be assured that we are taking the steps to ensure we keep GE safe and secure during this tough economic environment.”
Disclosure (“none” means no position):Long GE
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