Market rumors swirling that GE has asked existing lenders of GECC's $21.5 billion revolving credit facility which matures 2012 to amend terms of the agreement, which would allow GE, currently a guarantor on the facility, to become a borrower instead. And unlike the GGP forbearance request, lenders have said GECC has so far not contemplated any amendment fees or pricing changes. This is a radical reparture from GE's recent strategy of simply downstreaming cash to its sickly Capital subsidiary.
It is hard to remember when, if ever, was the last time a guarantor would end up becoming the borrower per a facility amendment or otherwise (in bankruptcy this does occur more frequently). A preliminary read on this action is that GECC is concerned about its leverage ratio, a topic I have discussed before, and by offloading over $21 billion in debt to its parent's books, should be able to pass upcoming covenant tests easier. Of course this is merely an exercise in optics, as the ultimate deteriorating picture especially on GECC's asset side, can not so easily be transferred, either to its parent or to the taxpayer. GECC recently did take advantage of the taxpayer's generosity after placing $8 billion of cheap FDIC backed debt.
In the meantime, GECC's CDS have fallen to a whopping seven day low of 8.5 in points upfront.
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