Thursday, March 19, 2009

Exclusive: Just What Does GECC Know That Nobody Else Does?

Some very interesting leaks during today's GECC investor update. While the bulk of what was presented is fluff, mostly about the company assuming profitability under the most dire scenarios (those Calcutta-outsourced financial models tend to have an ever so slightly bullish angle to them, just ask Erin Callan), GECC, during its live webcast, noted that it would consider 2010 funding needs through more TLGP debt.

First off, depositors everywhere rejoice at the notion that the DIF will be further diluted by further potential losses on GECC issues... However, much more interestingly, just where does GECC get its information that the TLGP will extend past October 31, 2009? On a March 17th Board Meeting, the FDIC accepted an amendment to the TLGP program, which in addition to increased fees (an issue ZH already discussed extensively), had the following disclosure on maturity:
The Interim Rule permits all IDIs participating in the DGP to issue DIC-guaranteed senior unsecured debt until October 31, 2009.
So when GECC claims it will address 2010 liquidity needs via the TLGP, two things come to mind:

1) A statement about its future financial condition not based on facts, which could be interpreted as a material misrepresentation by several shareholders who after buying GE stock today at $10 and seeing it drop to $5 (for example) in 3 months go nuclear and sue GE and GECC.

2) That the FDIC is in (in)direct illegal communication with General Electric, and has advised it it will already extend the TLGP's final maturity post the just adopted October 31 date, without proper notification of the U.S. taxpayer, to whom it is the ultimate "fiduciary."

Zero Hedge is not sure which outcome is worse, as there is either criminality involved or implicit conspiracy.

As for those who feel like buying GE stock and having the backstop of suing the company if it drops (see 1 above), I present GECC investor presentation currently mulled over by what few investors GE has left. Hat tip reader AT for bringing to my attention.

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Anonymous said...

slide 22 acknowledges that the facility terminates on 10/31/09

Tyler Durden said...

fair point. not comparable with what is being disclosed on actual webcast

Anonymous said...

Even if the facility terminates in October, I believe they can issue maturities up to 2012, so they can pre-fund 2010 maturities prior to the deadline.

Anonymous said...

you can borrow in 2009 for funding needs in 2010. Or did they say somethig like "if further fundng needs arise in 2010". Nuance and semantic though. It is being extended. Everyone knows that.

Good catch though.

Anonymous said...

Agree with Anonymous... They could isse 2yr and 3yr paper that they swap out of into floating rate funding, that would fund 2010 CP roll overs...