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4-Traders Homepage  >  Equities  >  Nyse  >  General Electric Company    GE

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General Electric Company : GE Selling $3 Billion Bond Deal; Success Could Spur More Issuance

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04/24/2012 | 08:04pm CET

--General Electric selling two-part bond deal

--Strong demand has deal "well oversubscribed"

--Other issuers waiting for stability, clarity from Fed

 
   By Patrick McGee 
   Of  
 

General Electric Co. (GE) is single-handedly demonstrating that buyers are comfortable scooping up newly issued corporate debt.

GE is selling $1 billion of floating-rate notes due in two years, giving investors 0.70 percentage point above the three-month London interbank offered rate, as well as $2 billion of five-year fixed-rate bonds at 1.5 points above Treasurys, according to a term sheet seen by Dow Jones Newswires.

Originally, only the five-year note was on offer. A banker working on the deal said it was "well oversubscribed" and motivated the company to add another tranche.

The GE deal is the first high-grade bond to hit the primary market this week, following the two slowest weeks of new-issuance in 2012. The lull follows one of the busiest quarters on record.

Syndicate managers say investors have cash to deploy for the right companies, but borrowers have been hesitant to issue debt this month given the volatile backdrop. Today's climate is more favorable--Markit's CDX North America Investment-Grade Index, a proxy for risk, improved 1.3% in early trading--but most companies are still residing on the sidelines until the Federal Reserve offers more clarity Wednesday on the direction of monetary policy.

"Issuers are looking for more stable ground before they tap the market," said Tim Cox, executive director of debt capital markets at Mizuho Securities. "Issuers like where Treasurys are, but they need more of a positive tone" to feel enticed into the market.

April's flight to quality has enabled corporate bonds to deliver a 1.10% total return so far this month, even as spreads to Treasurys have climbed 12 basis points to 190, their widest in two months, according to the Barclays U.S. investment-grade index. Corporate yields have been pulled down 8 basis points to 3.32%, as of Monday, just 5 basis points from the multi-decade low reached in early March.

Cox said a good experience for GE could "absolutely" improve confidence for other companies to issue debt.

New volume this month totaled just $26.2 billion, according to Dealogic data Monday. Syndicate desks were expecting more like $50 billion for the month, but companies have been in no rush after issuing more than $23 billion, on average, in each week of the first quarter.

April is typically slow because of earnings-related blackout periods.

"We're coming out of blackout so I think a lot of accounts are waiting on the edge of their seats for new deals," Cox added. "We're on the cusp to seeing the floodgates open," but global instability has shut down opportunistic borrowing.

-By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com

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Financials ($)
Sales 2017 126 231 M
EBIT 2017 17 916 M
Net income 2017 13 378 M
Debt 2017 27 505 M
Yield 2017 3,18%
P/E ratio 2017 19,63
P/E ratio 2018 17,33
EV / Sales 2017 2,36x
EV / Sales 2018 2,22x
Capitalization 270 080 M
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Number of Analysts 19
Average target price 34,3 $
Spread / Average Target 12%
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Jeffrey R. Immelt Chairman & Chief Executive Officer
Shane Fitzsimons Senior Vice President-Global Operations
Jeffrey S. Bornstein Chief Financial Officer & Senior Vice President
Jim Fowler Chief Information Officer
Victor Abate Chief Technology Officer & Senior Vice President
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