Moody’s Assigns A1 Issuer Rating to GE Capital Global Holdings

Moody’s Investors Service assigned issuer ratings of A1 and Prime-1 to GE Capital Global Holdings, with a stable outlook. The ratings assignment follows the announcement by Global Holdings’ ultimate parent General Electric that it has commenced a realignment and reorganization of the businesses of finance subsidiary GE Capital (GECC, A1/Prime-1).

Moody’s will withdraw GECC’s ratings after GE completes the reorganization, which includes a merger of GECC into GE.

The A1 rating Moody’s assigned to Global Holdings is based on strong anticipated support from GE, as well as the Baa2 stand-alone credit profile of the company’s consolidated lending and leasing businesses.

The reorganization will result in Global Holdings becoming the new holding company of GE’s finance operations after the merger of GECC into GE, which GE expects to complete by December 3, 2015.

A key aspect of GE’s support is its agreement to provide Global Holdings with $45 billion of borrowing capacity, reducing to around $20 billion by the end of 2016. On written request from Global Holdings, GE will borrow under its available committed bank credit facilities and on-lend the amounts to Global Holdings, without any restrictions regarding use of the funds. The agreement is unconditional and irrevocable.

GE also guarantees over $150 billion of tradable debt issued by GECC and its funding subsidiaries, which will become subsidiaries of Global Holdings as a part of the reorganization. Moody’s expects that GE will support future debt issued by Global Holdings and its subsidiaries, either through a guarantee or support agreement, though the company doesn’t anticipate needing to issue until after 2019.

GE has historically exhibited strong support of its finance operations, including through capital injections, indemnifications and debt guarantees. GE is engaged in a $200 billion downsizing of its finance operations through business and asset sales occurring through 2017. The businesses that GE will retain, including GE Capital Aviation Services, healthcare equipment finance and energy financial services, are better aligned with GE’s industrial-focused strategy, which Moody’s believes contributes to GE’s willingness to support the operations. Should GE’s support of Global Holdings’ decline, either because it reduces Global Holdings’ committed credit availability to less than $20 billion or institutes weaker than anticipated support of future debt issuance, Moody’s could reduce Global Holdings’ rating.

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