GE (GE) Said Claims Of Capital Raise Is Inaccurate
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With its stock in free-fall, GE (NYSE: GE) issued a note to the investment community saying claims that GE will be required to raise new capital near term is "is pure speculation" and "inaccurate."
Shares of GE are down 12% today to $6.13. The decline in GE seems to be related to lost confidence in the management and a likely triple-A rating cut. It is down four straight sessions despite cutting their dividend. Yesterday, GE CEO Jeff Immelt disclosed a mea culpa, but investors may still want his head
Below is a a copy of the note:
March 04, 2009
To the Investment Community:
Recently claims have been made that GE will be required to raise new capital near term. This is pure speculation, is inaccurate and is not based on any input from our company.
GE has acted aggressively during the current global economic crisis to strengthen our capital base and significantly increase sources of liquidity at GE Capital.
GE has a balanced portfolio of businesses and broadly diversified assets in terms of class, customer and geographic distribution. We are well positioned to weather this downturn.
Below are facts that address this recent speculation directly:
GE has a stronger capital position with ample liquidity
- With the 1st quarter $9.5 billion capital contribution, GE will have contributed $15 billion of capital into GECS over the last 6 months. GECS will have $63 billion of total equity, $34 billion of tangible equity and $36 billion of cash.
- As a result, GECS ratio of tangible common equity to tangible assets is 5.3%, which compares very favorably to other financial service institutions.
- Reducing the GE dividend in 2H ‘09 will result in $4.4 billion in incremental cash in the second half of 2009 and about $9 billion annually.
- As committed in December, we have further reduced our commercial paper to $60 billion and have completed 71% of our ‘09 long term debt issuances.
- We have de-levered our balance sheet. Our debt/equity ratio will decrease from 8 to 1 to 6 to 1 (including hybrid debt).
- We have ~$70 billion of remaining capacity under the TLGP and
~$98 billion of access to the CPFF if necessary.
Currently, we have no plans to raise additional equity. In the unexpected event that GE Capital requires additional equity, we have a number of options to satisfy that need without seeking external capital.
We have stressed our financial service portfolios and do not see the need to raise additional capital. We plan to present results of these tests at our upcoming earnings webcast to further demonstrate the quality of our portfolio and ability to absorb potential losses in this difficult environment. Over the last several months we have significantly increased disclosure regarding our financial services businesses. We are committed to continue to enhance disclosure and transparency for our investors in the future.
We know these are challenging times, please be assured that we are taking the steps to ensure we keep GE safe and secure during this tough economic environment.
Please let Joanna or I know if you have questions. Thank you.
Trevor
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Comments
GE Lies
There's a reason the market isn't reacting to GE's press releases re not raising new capital by buying GE stock; no one has any faith in management. Two weeks before they cut their dividend by 2/3, they swore to the investment community it would never happen. Why would anyone with half a brain trust them now?
Honest! We wouldn't lie to you a fourth time!
So after lying about having the "numbers in the bag", after lying about not needing to raise billions of dollars by selling 3B in shares to Warren Buffett and 13B in shares to other traders, and after lying about maintaining the dividend through 2009 (the dividend will be 0.10 on December 2009) we should totally believe this fourth letter about "not needing to raise more capital." Come on! Fool me 3 times, shame on you. Fool me 4 times, shame on me.
The Wall Street Media Frenzie
I am sick and tired of the sad Wall Street Investment firms and the financial media constantly hacking away at GE. Yes, their stock is down, but have they looked at the rest of the market? The Dow Jones each day? Come on, GE has aggressively tackled a very bad situation is working through it. Wake up and start giving the country some positive news!!!! The market needs some positive vibes right now, not all your negativity. As a shareholder, I'd like to thank GE for constantly updating their shareholders on the market situation and how they are meeting the day to day changes. While GE is busy trying to shore up its company the very same investment firms are flying off to the capital with their hands out!
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Mr. Immelt is either incompetent or a liar
Josh on Mar 4, 2009 11:58 AMHow can anyone trust this Mr. Immelt. He has no credibility. Please give me one prediction that he made that was correct? Mr. Immelt has made bold statements regarding the dividend, credit rating, earnings, portfolio business mix, and talent management and days later was forced to reverse his statements. At his level, he is either disconnected and incompetent or a liar. One of these is true. Anyone who thinks otherwise is either a fool or brain washed.