M dub

GE: Lose AAA Rating or Cut Dividend

jegan,
i see what you are saying but i was trying to address the op's question of dividend and credit quality, not earnings downside. hopefully no one really sees GE as anything other than a bank in terms of the risk on investment, for if not then they own the common equity of an industrial with 13.5x debt/ebitda (yikes!) but as i said with a government backstop on the bank all is well and investors can put their head in the sand for a while.

i agree that the spin coming out of there is of epic proportions given the severity of conditions, not just economically but also at GE. They point to 70% of earnings coming from service revenue, and that's all nice, but what of all that (seemingly) ginormous operating leverage (ie high fixed overhead) as orders / backlog go down with cancelled orders? No, the gov't is not (yet) backstopping GE industrial, but who's to say they don't sell a few extra bonds at GMAC and upstream some cash dividends to parent?

Even that's not a stretch to consider, as even management decided to keep at the parent level buffet's $3b of preferred equity, rather than funnel it down to gmac when it needed it the most.

they want a stable rich dividend and AAA rating, and with government gty'ing the bank, why not? Its all possible, unless of course the sovereign credit rating goes down.......




On Jan 11 05:00 PM jegan ;-) wrote:

> mdub..Aside from the excessive use of CAPS, I agree with Diegojames...
> (Also agree with the leek pie and salmon)... GE has too many divisions
> that are subject to teh whims of our present economic collapse. And
> the financial guarantee only really applies to GMAC, just part of
> GE. What's the near-term upside for GE? The poor quality appliance
> division? Aerospace? Not the reconstituted finance division! That
> really only leaves the industrials. And maybe in a year that might
> start to work if our new President can actually get the infrastructure
> play moving, or if China gets back in gear.... Remember that these
> **big** projects have a lot of hurdles, EPA, lawsuits, contracts,
> engineering etc... and they don;t turn on a dime. Having said that,
> GE does seem to have activity in China now that might ramp up. The
> question there is, why buy GE and drag around everything else, when
> you can buy ABB or SI which are already working well and don't have
> the rest of the business to drag along.
>
> jegan ;-)

GE: Lose AAA Rating or Cut Dividend

question: why need to reduce the dividend when you have a backstop guarantee on refinancing / issuing debt? taxpayers have guaranteed GE's divivend ; at one time there could have very well been a run on the bank, but now hundreds of billions in its cap structure is backed by fdic (bonds) or fed (CP). Financial flexibility by taxpayers means GE dividend needs to go nowhere.

As a taxpayer, this is ludicrous, but as an investor what could be better than to have your guarantor be big daddy?

General Electric: Genuine Risk of Collapse?

Mr. Wilkerson's commentary on this blog leaves me speechless, and truly wanting to go naked short. He obviously has no idea what leverage is and does. They truly think the GECC assets are bull market investment grade quality. If that's the case, surely you won't mind taking us through them instead of those cream puffs called equity analysts that cover you and lay up the kool aid questions....how 'bout those $73 bn of "financing receivables" a significant amount of which are subprime, of course you don't disclose the gross amount, only net of "credit insurance" (as if that's worth something?) there is a reason everyone is afraid of the black box.

General Electric Gets a $140B Bailout - What's the Point of AAA?

a) bank funding 101: don't mismatch your book.
b) GE had less revolver backup lines than its CP outstanding. this was knows a long while ago, but what other idiotic moves are waiting in the black box? this sense of infallability won't reflect itself in the quality of the underlying assets? come on...
c) go with what got you here: lack of transparency. the captain is obviously going down with the ship - and with the way their PR machine (hi Russell) is handling the spin, and it is taking PUBLIC money, you guys better watch your backside before the cuffs go on.