Good news! GE Capital (GE) is leaving the FDIC’s guaranteed debt program, otherwise known as the TLGP.
We’ve surmised that the entire TLGP was basically just a bailout for GE Capital, which, as evidenced by CIT’s troubles, would’ve had an incredibly hard time funding itself in the open market over the past several months, since the crisis began.
But the thaw’s arrived, at today GE Capital proudly announces that the FDIC has approved its plan to leave the program. Well, except they’re not leaving just yet. And we’re sure they’re in no rush to roll over the FDIC-backed stuff.
…GECC no longer will issue government-guaranteed short-term debt (commercial paper with maturities of 31 to 270 days) and will be able to issue non-guaranteed long-term debt with maturities of 18 months to three years, as well. The FDIC and GECC also agreed to reduce GECC’s aggregate limit under the program, consistent with the company’s position that it would not need to utilise its maximum authorised capacity. With these revisions, the company will have about $14 billion remaining long-term debt capacity under TLGP.
“Today’s plan to exit from TLGP affirms the strength of GE Capital’s funding and liquidity position, including reduced reliance on government funding programs and our ability to access non-guaranteed debt markets. We have issued approximately $12 billion in long-term debt outside of the program, including close to $3 billion this week in a Euro deal that saw strong demand,” said GE Senior Vice President and Treasurer Kathryn Cassidy. “This move is a positive step in returning the broader capital markets to normal functioning and is in line with GE Capital’s 2009 and 2010 debt issuance and funding cost plans. It also allows us to respond to strong investor demand for GECC longer-dated non-guaranteed commercial paper.”
In approving GECC’s application, the FDIC considered several factors, including the financial condition of GECC, its capital, management and the risk presented to the FDIC.
So, they’re actually going to keep using the program for longer-term debt (18 mos – 3 years), though they’ll only raise $14 billion more. Meanwhile they’re spinning it as the FDIC (somewhat) reluctantly letting GE Capital go on its own, as if GE never really wanted in, but merely did so for the good of the financial system. Well played, GE.
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