General Electric Company
) recent $3 billion debt issue was assigned a rating of Aa3 by
leading credit rating agency Moody's. The debt issue comprised
$750 million and $2.25 billion of senior unsecured bonds maturing
in 2024 and 2044, respectively. The 10-year notes were priced to
yield 3.487%, while the 30-year bonds were priced to yield
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The Aa3 senior unsecured debt rating reflects General Electric's
strong competitive position in industrial businesses across an
extensive range of products and services. The stable rating
outlook implies Moody's assumption that General Electric will
continue to generate robust, resilient levels of profitability
and free cash flow across business cycles.
Capitalizing on a lucrative low-interest rate environment,
General Electric's opportunistic move was lauded by markets, as
the order book for the long-dated bond issue was oversubscribed
within 45 minutes for $11 billion worth of orders. The demand
might have been the consequence of a rare opportunity for
investors to buy debt of the parent company, as most of General
Electric's debt is issued by its financial arm GE Capital. To
enumerate, GE Capital accounts for $210 billion of the $222
billion worth of long-term debt that appears on General
Electric's balance sheet as of Dec 31, 2013.
Moody's expects the net proceeds to be utilized for core
industrial operations, continuing General Electric's recent trend
of complementing organic investments with opportunistic
acquisitions. The bond issue will also provide General Electric
the requisite wherewithal for dividends and share repurchases.
The Federal Reserve's low-interest policy continues to be a key
driving force for the U.S. bond market, as evidenced by a
whopping $1.51 trillion of corporate debt offerings in 2013,
according to a Bloomberg report. Discounting the tapering
announcements, the corporate bond market looks set to continue
its momentum as more corporates rake in cheap finance via debt
General Electric currently holds a Zacks Rank #4 (Sell). Some
better-ranked stocks in the industry that look promising include
Federal Signal Corp.
Noble Group Ltd.
). While Federal Signal and Noble Group each sport a Zacks Rank
#1 (Strong Buy), Marubeni carries a Zacks Rank #2 (Buy).