GE Selling Spreads to Bond Markets
November 13 2018 - 5:04PM
Dow Jones News
By Matt Wirz
General Electric Co. bonds fell sharply Tuesday, even as the
company said it would raise around $4 billion in cash by selling up
to 20% of its stake in oil-field-services company Baker Hughes, a
GE Co.
The price of GE's widely traded 4.4% bond due 2035 fell about
2.5% to 82 cents on the dollar, with more than $433 million face
amount of the debt changing hands, according to data from
MarketAxess. The company accounted for three of the four most
actively traded corporate bonds in U.S. debt markets, the data
showed.
The decline in GE debt contrasted with a rebound in the
company's shares triggered by the announced sale of the Baker
Hughes stake. The shares had fallen as much as 10% Monday, when
bond markets were closed for Veterans Day, and bond prices are
still catching up to the cumulative loss of over 30% in the stock
since early October.
As the price of GE's bonds fall, their yields rise, pushing up
the cost the company must pay when trying to borrow new funds.
Bonds issued by the company's finance arm GE Capital that come due
in January 2020 now yield about 4.6%, up from 3.3% in August.
The higher implied borrowing cost reflects bond investors' fears
about GE's dwindling cash as its core energy business struggles and
charges pile up from GE Capital's insurance liabilities. The cost
of protecting against a default on $10 million in GE debt through
credit default swaps has roughly tripled in the past two months to
about $182,000, according to data from MarketAxess.
GE does not plan to raise new debt until 2020 so the recent
increase in its bond yields will not increase current interest
expenses, a person familiar with the company said. The company
plans to pay down debt through asset sales before returning to bond
markets, the person said.
--Sam Goldfarb contributed to this article.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
November 13, 2018 17:49 ET (22:49 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Sep 2024 to Oct 2024
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Oct 2023 to Oct 2024