Monday, March 9, 2009

GE Capital Hires Banks to Sell Government-Backed Debt

UPDATE below.
Why is the American taxpayer guaranteeing GE Capital debt?
From Bloomberg:
General Electric Capital Corp., the finance arm of General Electric Co., hired five banks to manage a bond sale under the U.S. government’s Temporary Liquidity Guarantee Program.

Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are arranging the sale, according to an e-mail sent to investors. Deutsche Bank AG, HSBC Holdings Plc and Royal Bank of Scotland Group Plc are also helping with the “benchmark” issue. A benchmark sale typically means at least $500 million.

“The market is going to remain heavily dominated by government-guaranteed paper for many more months as people are scared of corporate defaults and the lack of liquidity in non- guaranteed bonds,” said Guthrie Williamson, a Sydney-based money manager with Principal Global Investors, which oversees $198 billion.

General Electric shares fell below $6 last week for the first time since December 1991 on concern GE Capital may need additional cash. GE Chief Financial Officer Keith Sherin on March 5 said he sees no need to raise additional capital, and that the company’s financial services businesses expect to be profitable in the current quarter and year.

General Electric dropped 5 cents, or 0.7 percent, to $7.01 as of 12:52 p.m. in Frankfurt trading, according to data compiled by Bloomberg.

Covenant Amendment

Stamford, Connecticut-based GE Capital has raised more than $27 billion from government-guaranteed bond sales since December, according to data compiled by Bloomberg. It is offering to buy back about $1.45 billion of debt as it petitions bondholders to amend a covenant in the securities that limits the unit’s ability to pledge property or assets to secure debt without having to secure the notes...MORE

Here's how the purveyors of this paper stack up against the list of AIG counterparties who were paid off in AIG bailout I (or was it II? III?):

Some banks that were paid by AIG after it was bailed out by the government

  • Goldman Sachs- -check
  • Deutsche Bank- -check
  • Merrill Lynch
  • Société Générale
  • Calyon
  • Barclays
  • Rabobank
  • Danske
  • HSBC- -check
  • Royal Bank of Scotland- -check
  • Banco Santander
  • Morgan Stanley- -check
  • Wachovia
  • Bank of America
  • Lloyds Banking Group

Source: WSJ research

The usual suspects.
Update: Here is Fortune's list of Aig counterparties:

Société Générale (France)

Goldman Sachs (GS, Fortune 500)

Merrill Lynch International

Deutsche Bank (Germany)

Calyon, Crédit Agricole (France)

UBS (Switzerland)

Barclays (England)

Coral Purchasing, DZ Bank (Germany)

Bank of Montreal (Canada)

Rabobank (the Netherlands)

Royal Bank of Scotland

Bank of America


HSBC (England)

Barclays Global Investors