New York, November 16, 2017 -- Moody's Investors Service downgraded the long-term issuer rating of GE Capital Global Holdings, LLC (GE Capital) to A2 from A1. The long term ratings of GE Capital's subsidiaries were also downgraded (see complete list below). The outlook for the ratings is stable. This follows Moody's downgrade of the long-term issuer rating of parent General Electric Company (GE) to A2 from A1, with a stable outlook (see separate press release).
RATINGS RATIONALE
Moody's downgraded GE Capital's ratings based on the downgrade of GE's ratings. GE guarantees all of the traded debt of GE Capital and its subsidiaries on an unconditional and irrevocable basis.
GE has historically exhibited strong implicit and explicit support of its finance operations, including through debt guarantees, capital injections, and indemnifications. GE also provides GE Capital with $25.3 billion of borrowing capacity on an unconditional and irrevocable basis. On written request from GE Capital, GE will borrow under its available committed bank credit facilities and on-lend the amounts to GE Capital, without any restrictions regarding use of the funds. Moody's expects that GE will support future debt issued by GE Capital and its subsidiaries, either through a guarantee or support agreement, though the company doesn't anticipate needing to issue debt until 2019.
GE Capital's Baa2 stand-alone credit profile incorporates its significant reduced scale through divestiture of non-core businesses, the franchise positioning and operating strength of its continuing businesses, and the company's liquidity and capital strength. GE Capital's downsizing was largely completed by early 2017, resulting in the company having a smaller risk footprint and significantly reduced exposure to capital markets funding, but increased asset concentration and potentially higher earnings volatility. Risks are mitigated by the company's strong liquidity profile. GE Capital maintained a strong capital position during its transformation but has since migrated its leverage to a higher but still adequate level; the firm's ratio of tangible common equity to tangible managed assets measured 11.1% at June 30, 2017 (reflecting Moody's standard and analytical adjustments) compared to 12.8% at December 30, 2016.
GE Capital's ratings could be upgraded if GE's ratings are upgraded and if GE's support of GE Capital, including future debt issuance, remains strong. A downgrade of GE Capital's ratings could result from a weakening of GE support or weaker than anticipated support of future debt issuance. Materially weaker liquidity or a material increase in leverage, a decline in profitability or reversal of asset quality improvements for a sustained period of time, or a downgrade of GE's ratings could also contribute to a ratings downgrade.
Affected Ratings:
Issuer: GE Capital Australia Funding Pty. Ltd.
..Downgrades:
....Senior Unsecured Regular Bond/Debenture, Downgraded to A2/STA from A1/STA
....Senior Unsecured Medium-Term Note Program, Downgraded to (P)A2 from (P)A1
....Subordinate Medium-Term Note Program, Downgraded to (P)A3 from (P)A2
..Affirmations:
....Short Term Medium-Term Note Program, Affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: GE Capital Canada Funding Company
..Downgrades:
....Senior Unsecured Regular Bond/Debenture, Downgraded to A2/STA from A1/STA
....Senior Unsecured Medium-Term Note Program, Downgraded to (P)A2 from (P)A1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: GE Capital EFS Financing Inc.
..Downgrades:
....Long Term Local Currency Issuer Rating, Downgraded to A2/STA from A1/STA
..Outlook Actions:
....Outlook, Remains Stable
Issuer: GE Capital European Funding
..Downgrades:
....Senior Unsecured Regular Bond/Debenture, Downgraded to A2/STA from A1/STA
....Senior Unsecured Medium-Term Note Program, Downgraded to (P)A2 from (P)A1
....Subordinate Medium-Term Note Program, Downgraded to (P)A3 from (P)A2
..Affirmations:
....Senior Unsecured Commercial Paper, Affirmed P-1
....Short Term Medium-Term Note Program, Affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: GE Capital Global Holdings, LLC
..Downgrades:
....Long Term Local Currency Issuer Rating, Downgraded to A2/STA from A1/STA
..Affirmations:
....Short Term Local Currency Issuer Rating, Affirmed P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: GE Capital International Funding Company
..Downgrades:
....Senior Unsecured Regular Bond/Debenture, Downgraded to A2/STA from A1/STA
..Outlook Actions:
....Outlook, Remains Stable
Issuer: GE Capital Treasury Services (U.S.) LLC
..Affirmations:
....Senior Unsecured Commercial Paper, Affirmed P-1
....Outlook, Remains Stable
Issuer: GE Capital UK Funding
..Downgrades:
....Senior Unsecured Regular Bond/Debenture, Downgraded to A2/STA from A1/STA
....Senior Unsecured Medium-Term Note Program, Downgraded to (P)A2 from (P)A1
....Subordinate Medium-Term Note Program, Downgraded to (P)A3 from (P)A2
..Affirmations:
....Senior Unsecured Commercial Paper, Affirmed P-1
....Short Term Medium-Term Note Program, Affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
Issuer: General Electric Capital Canada Inc.
..Downgrades:
....Senior Unsecured Regular Bond/Debenture, Downgraded to A2/STA from A1/STA
....Senior Unsecured Medium-Term Note Program, Downgraded to (P)A2 from (P)A1
..Affirmations:
....Short Term Medium-Term Note Program, Affirmed (P)P-1
..Outlook Actions:
....Outlook, Remains Stable
The principal methodology used in these ratings was Finance Companies published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.