In a nutshell, GE's credit rating is now too low for big financial institutions to invest in, as they all adhere to a certain level of credit rating which they will not go below. This is nothing short of a disaster for GE, which now has to essentially support itself outside the credit market.
https://www.barrons.com/articles/ges-credit-rating-was-just-cut-by-moodys-1541014710
They need to trigger the convenants, putting GE in play. Wall St wants Aviation on the cheap for sale at premium to Honeywell.
Of course I make this up — but if you are cynical enough, or know the way of the Street, you can just see this one through.
We want GE to die!
GE raised lot of short term cash using it's commercial paper offers. Lower rates than bonds or bank credit. 3-5% difference in weighted average capital costs.
With ratings down, commercial paper dries up (no takers at lower rates). Cost of borrowing goes up at the same time rates are rising and debt is all time high.
Cash flow is the most important metric in any business. It is like oxygen.
Woes in power segment are choking off oxygen for whole company. It is race between fixing the cash flow in power before liquidity crisis wipes out shareholders.
It is not fatal if fixed in time. Apple came within 2 months of bankruptcy in 96 before getting Bill Gates to the rescue. Culp could become a legend if he can turn this around. Or just roadkill
We can't raise equity since we are under SEC investigation; it will be harder to raise debt with downgrades and eventual junk status; economic downturn just around the corner. Not looking good.
GE needs to go the route of GM and split and file for bankruptcy for 1 entity
Oh yeah? How's free cash flow?
While this isn't good, GE's rating is still investment grade (3 levels above junk bond status). It is higher than GM, Ford, and Chrysler, and the last time I looked, their dealer lots had many cars and trucks available to buy. So let's not make things worse than they really are.
If he credit rating drop too much, all the new contracts mean nothing if cant buy the materials to build the turbines
Now this is a disaster. Trump to the rescue?
Immelt I hope your happy
A company can have all the contracts in the world, but without the funds to purchase the materials to make the product, you go belly up.
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