GE Selling Spreads to Bond Markets
November 13 2018 - 1:19PM
Dow Jones News
By Matt Wirz
General Electric Co. bonds fell sharply Tuesday, even as the
company said it would raise around $4 billion in cash by selling up
to 20% of its stake in oil-field-services company Baker Hughes, a
GE Co.
The price of GE's widely traded 4.4% bond due 2035 fell about
2.5% to 81 cents on the dollar, with more than $240 million face
amount of the debt changing hands, according to data form
MarketAxess. The company accounted for three of the four most
actively traded corporate bonds in U.S. debt markets, the data
showed.
The decline in GE debt contrasted with a rebound in the
company's shares triggered by the announced sale of the Baker
Hughes stake. The shares had fallen as much as 10% Monday, when
bond markets were closed for Veterans Day.
A company spokeswoman couldn't immediately be reached for
comment.
As the price of GE's bonds fall, their yields rise, pushing up
the cost the company must pay when trying to borrow new funds.
Bonds issued by the company's finance arm GE Capital that come due
in January 2020 now yield more than 4.6%, up from 3.3% in
August.
The higher implied borrowing cost reflects bond investors' fears
about GE's dwindling cash as its core energy business struggles and
charges pile up from GE Capital's insurance liabilities. The cost
of protecting against a default on $10 million in GE debt through
credit default swaps has roughly tripled in the past two months to
about $182,000, according to data from MarketAxess.
--Sam Goldfarb contributed to this article.
(END) Dow Jones Newswires
November 13, 2018 13:04 ET (18:04 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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