GE Capital Seeing Some Wins - Analyst Blog
Recently, GE Capital, one of the largest segments of General Electric Company ( GE ), has seen some success in the United Kingdom and Australia. Over the last couple of days, GE capital has provided loans worth £220 million ($346 million).
Yesterday, GE Capital provided a loan worth £150 million to Accolade Wines, the largest wine company in terms of volume in Australia and the U.K. The financing is expected to increase Accolade's working capital and fund its capital spending, as the company plans to increase its international presence.
Accolade is one of Australia's leading wine companies, housing Australia's Hardys and Banrock Station, South Africas's Kumala and Fish Hoek and the USA's Echo Falls brands. Accolade, which is owned by Champ Private Equity (holds 80% stake), is also a distributor to large retailers such as Tesco and Sanisbury in the U.K. Accolade also owns a 50% stake in the U.K.'s largest wholesalers of alcoholic beverages, Mathew Clark.
Earlier, on November 21, 2011, GE Capital granted a loan of £70 million as a senior secured credit facility to Energy Alloys LLC, a provider of oil field metals and services, to oil and gas manufacturers and service companies worldwide and especially the United Arab Emirates (leading oil producers in the world). Energy Alloys intends to use the fund for growth and meeting its working capital requirements.
GE Capital is the largest division of GE in terms of revenue (33% of the company's total revenue for fiscal 2010) and has two sub segments: Commercial Finance and Consumer Finance. These sub segments together accounted for approximately 80% of GE Capital's total asset base.
Although GE capital does not have any direct exposure to the subprime market in the U.S. especially, after the sale of WMC Mortgage; however it has a huge exposure in credit cards, non U.S. mortgages, auto loans, commercial business loans, real estate and equipment leasing.
Defaults on consumer loans, tighter credit markets and declines in real estate values impacted the business in fiscal 2010. Analysts believe that these factors, especially GE Capital's large exposure to the commercial real estate market will continue to be a headwind for GE capital's business atleast through the first half of fiscal 2012. The primary competitors include Ally Financial Inc. (ALLY-PB), Ford Motor Credit Company LLC and ORIX Corporation ( IX ).
General Electric currently holds a Zacks #3 Rank, which indicates a short term (1-3 months) Hold rating on the stock.
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