The cost to insure General Electric debt has shot up to levels last seen in 2018, possibly reflecting concern in regards to the firm’s publicity to coronavirus-caused drops in rates of interest, air travel and global growth.
GE credit default swaps, a measure of confidence in a company’s capacity to repay debt, had been priced at 200.7 basis points Wednesday, up 119% from 91.67 a week ago, based on data from Markit.
It was their highest level since December 2018, just after GE’s credit ratings had been reduced and investors frightened its debt might become non-investment grade.
A GE spokeswoman on Wednesday pointed to Chief Govt Larry Culp’s remarks that coronavirus and final week’s U.S. interest rate reduction had not altered GE’s 2020 debt-reduction target.
“We’ve got a strong liquidity position with more than $17 billion at GE Industrial, approximately $19 billion at GE Capital, and access to over $35 billion of available credit services,” the GE Spokesperson stated.
The jet engine manufacturer, power plants and other industrial goods is struggling to generate revenue and money circulation after ailing-timed acquisitions and poor strategy moves in recent times. GE stated last week that coronavirus might cut Q1 cash flow by $500 million.
Culp told buyers last week that GE is sensitive to rates of interest. A 25 basis-point rate drop raises GE’s pension obligation by $2.3 billion, he stated. Lower rates increase GE’s liability on long-interval insurance policies.