Moody's Investors Service lowered its credit ratings on General Electric Co. (NYSE:GE) as well as its financing subsidiary, noting risks associated with the conglomerate's lending unit.
Moody's downgraded GE's senior unsecured debt rating by one notch to Aa3, the firm's fourth-highest rating. Moody's lowered its rating on General Electric Capital Corp. by two levels to A1, a notch below its parent's rating. The outlook is stable.
Pretty much as expected. Might have an initial shock value downwards, but shouldn't be significant or last long. I still like this company and believe it is currently undervalued.
The actions concludes a review for possible downgrade initiated by Moody's last month. The firm had pointed to new risks GE's financing unit could pose in the event of another credit crisis.
"We believe that GE's industrial operations continue to have many Aaa-like credit characteristics," said Moody's Senior Vice President Russell Solomon. "The downgrade reflects Moody's view of the heightened risk profile inherent to finance companies like GECC, which has strategic importance to GE, rather than any deemed incremental risk related to GE's industrial business lines."
Disclosure: I am long GE.