S&P downgrades GE and GE Capital due to debt issues
On May 23, 2019, credit rating agency S&P Global Ratings downgraded General Electric (GE) and its finance arm, GE Capital, citing concerns about the company’s high levels of debt. The downgrade comes as GE continues to struggle with financial difficulties stemming from its troubled power business and other operational challenges.
S&P lowered GE’s long-term credit rating from BBB+ to BBB, while also downgrading GE Capital’s long-term rating from BBB+ to BBB-. The agency also placed both companies on a negative outlook, indicating the possibility of further downgrades in the future.
The downgrade is a significant blow to GE, once considered one of the most stable and respected companies in the world. The company has been grappling with a series of setbacks in recent years, including a drastic decline in its stock price, ongoing investigations by federal regulators, and a hefty debt load.
GE’s problems can be traced back to its ill-fated acquisition of Alstom’s power business in 2015, a move that significantly increased the company’s debt burden. In addition, GE has struggled with declining revenue and profitability in its core businesses, particularly in the power segment, which has been hit hard by changes in the energy industry.
The downgrade by S&P reflects growing concerns among investors and analysts about GE’s ability to manage its debt and turn its business around. The company’s new CEO, Larry Culp, has been working to implement a turnaround plan that includes cost-cutting measures and divestitures of non-core assets. However, the road to recovery for GE is expected to be long and challenging.
In response to the downgrade, GE issued a statement reaffirming its commitment to improve its financial health and restore value for shareholders. The company highlighted its progress in reducing costs and strengthening its balance sheet, while acknowledging the need for further actions to address its debt levels.
Despite these efforts, the downgrade by S&P serves as a stark reminder of the challenges facing GE as it seeks to regain its footing in the global market. Investors will be closely watching the company’s performance in the coming months to see if it can successfully navigate its way out of the financial quagmire it finds itself in.
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