💡 How Is GE Escaping The Debt Spiral?

BlackRock's China foray, Microsoft's new hardware.

Hey Global Investor, here’s what you need to know before the US markets open.

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💡 General Electric: Escaping The Debt Spiral?

After being trapped under a massive debt pile, General Electric (GE) is on a debt reduction spree. Following a slew of asset sales, the company announced an increase in the outlay for bond buyback. It aims to reduce overall debt to less than $45B by 2023. (Tweet This)

Wrong Timing?

To say that GE had a tough past few years is to dramatically understate what the company has gone through. GE has the dubious distinction of losing over $100B in market capitalization over the last five years – more than Ford (F), Delta (DAL), and United Airline Holdings (UAL) combined.

GE couldn’t have timed its business moves worse. Its largest-ever industrial acquisition – Alstom’s power business for $9.5B – suffered a collapse of gas turbine demand shortly after the deal was consummated. This setback was the proverbial canary in the coal mine.

Two years later in 2017, GE merged its oil & gas services business with that of Baker Hughes for a 63% stake, costing $7.4B in cash. A crash in oil prices soon thereafter meant another deal-gone-sour.

Things went so far south that there were no sacred cows to spare. GE cut its much-revered dividend in half – only the second time since the Great Depression. The company was left with an inflated debt pile and a balance sheet that would take years to clean up.

Making GE Stronger Again

Saddled with over $100B in debt, slashing it became priority #1. GE embarked on an asset selling spree to free up cash. It sold part of its stake in Baker Hughes for a loss and hopes to divest the rest over the next three years.

GE also sold its Biopharma unit to Danaher in 2020 for $20B. Earlier this year, the company sold its GECAS aircraft-leasing business to AerCap(AER) for $31B of which $24B is in cash. The company also increased the quantum of bond purchase from $4.9B to $7.6B. The offers will expire on June 21.

At the end of Q1 2021, GE’s debt stood at $74B, a significant reduction from its peak. It aims to cut it by another $30B in two years. After a few mea culpas, GE finally seems to have a steady pair of hands steering the company in the form of its CEO Larry Culp.

Market Reaction
GE ended the day at $13.63, down 0.7%.

Company Snapshot 📈

GE $13.63 -0.10 (0.73%)

Analyst Ratings (22 Analysts) BUY 55%  HOLD 45%  SELL 0%

Newsworthy 📰

New Avenues: BlackRock gets license to start China mutual fund business (BLK -0.40%)

Investigation: Eli Lilly memo says firm did not make false statements to FDA (LLY +3.29%)

At Your Fingertips: Microsoft is developing new hardware to bring its ‘Netflix for games’ service to TVs (MSFT +1.44%)

Later Today 🕒

  • Nkarta Inc. Earnings (NKTX)
  • Salesforce Annual General Meeting (CRM)
  • Brookfield Asset Management Annual General Meeting (BAM)
  • 7:30 PM IST: Consumer Sentiment Index (Preliminary)

Fun Fact of The Day 🌞

Samsung accounts for 20% of Korea’s GDP

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