General Electric Capital Corp., the finance arm of General Electric Co., hired five banks to manage a bond sale under the U.S. government’s Temporary Liquidity Guarantee Program.

Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are arranging the sale, according to an e-mail sent to investors. Deutsche Bank AG, HSBC Holdings Plc and Royal Bank of Scotland Group Plc are also helping with the “benchmark” issue. A benchmark sale typically means at least $500 million.
“The market is going to remain heavily dominated by government-guaranteed paper for many more months as people are scared of corporate defaults and the lack of liquidity in non-guaranteed bonds,” said Guthrie Williamson, a Sydney-based money manager with Principal Global Investors, which oversees $198 billion.
General Electric shares fell below $6 last week for the first time since December 1991 on concern GE Capital may need additional cash.
GE Chief Financial Officer Keith Sherin on March 5 said he sees no need to raise additional capital, and that the company’s financial services businesses expect to be profitable in the current quarter and year.
Stamford, Connecticut-based GE Capital has raised more than $27 billion from government-guaranteed bond sales since December, according to data compiled by Bloomberg. It is offering to buy back about $1.45 billion of debt as it petitions bondholders to amend a covenant in the securities that limits the unit’s ability to pledge property or assets to secure debt without having to secure the notes.
GE Capital plans to repurchase fixed- and floating-rate notes in 29 issues ranging from $10,000 to $450 million, it said in a March 5 prospectus. The amendment will “provide the company with broader financing capability,” it said.
The company “has strong liquidity for 2009, largely because of its access to government programs,” Barclays Capital analysts led by Jonathan Glionna in New York said in a report.
Bonds guaranteed through the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program are rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s, their highest classifications.
The FDIC in October agreed to guarantee three-year senior unsecured bank debt issued through June 30 as part of a U.S. Treasury plan to stimulate lending. The program has since been extended to debt issued through Oct. 31.
GE Capital in January sold $4.5 billion of 2.2 percent FDIC-backed bonds at 116 basis points more than U.S. Treasuries, Bloomberg data show. The securities maturing in June 2012 were quoted at 79 basis points over the benchmark today, according to Pershing LLC prices. A basis point is 0.01 percentage point.
The new notes may be priced during the early part of this week, the e-mail said. General Electric spokesman Russell Wilkerson couldn’t be reached for comment outside U.S. business hours today.
(Source: Bloomberg)