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GE Capital Raises Cap for New Notes in Debt Exchange Offer

General Electric Company 's GE finance arm, GE Capital, declared early participation results of its recent private offer to exchange up to $30 billion of outstanding debt for new notes with shorter maturities. The step is a part of the landmark strategic restructuring that the industrial giant has undertaken to shrink its huge finance arm.

Notes worth about $53.9 billion in principal amount were offered for exchange by the debt holders in the early participation window. Consequently, GE Capital decided to increase the principal amount of new notes to be issued from $30 billion to $36 billion. Also, it increased the cap on the principal amount of 2016 new notes to be issued from $15 billion to $16.25 billion.

GE Capital expects that the 2016 New Notes Cap will allow all old notes validly tendered in the offers will be accepted without the need for proration. The offer will expire on Oct 19, 2015, unless extended by the company.

If any of the old notes are not tendered before the offer expires, or remain outstanding, they will continue to accrue interest per the terms and will mature on their particular maturity dates. They will be entitled to all the rights and privileges according to the terms of the instruments, including their existing GE guarantee.

The notes are being issued by a newly formed finance subsidiary of GE Capital. In order to comply with the debt covenants under the GE Capital restructuring scheme, GE Capital will eventually merge into GE. GE Capital's domestic and international operations will be also be segregated, with the latter being consolidated into a new international holding company - GE Capital International Holdings.

The exchange will help lower GE Capital's debt at a swift pace, even as the parent company sheds the assets of the finance unit by the billions almost every week.

The move is part of a much bigger strategic plan of GE, as it aggressively scales back its banking operations and divests its financial assets in order to focus more on its industrial businesses. It will also be a major step in ultimately rendering GE Capital free of its designation of a systemically important financial institution.

The exchange offer also intends to align the assets and liabilities of GE Capital International Holdings from a maturity profile and liquidity standpoint. The step takes into account all its asset sales and is shortening the maturity profile of targeted liabilities where suitable.

GE presently carries a Zacks Rank #3 (Hold). Better-ranked stocks that are worth a look now include Leidos Holdings, Inc LDOS , carrying a Zacks Rank #1 (Strong Buy), along with Engility Holdings, Inc EGL and Northrop Grumman Corporation NOC , carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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