GE kicks off US$23b bond tender offer to cut debt load

[BOSTON] General Electric launched an offer to buy back as much as US$23 billion of debt as the industrial giant carries out a plan to slash its debt load.

GE is targeting a series of bonds maturing through 2050 in an offer that expires on Dec 9, the company said in a statement on Wednesday.

The company is on target to cut its borrowings by more than US$75 billion in the three years through next month thanks to operational changes designed to boost cash flow and profit margins, the company said in the statement.

About 70 per cent of the tender offer is targetted at the intermediate to long end of its obligations and provides a "credible plan to improve cash flow in front of GE's pending breakup," according to BI's credit analyst Joel Levington.

The offer comes a day after GE announced plans to split into three separate companies in a stunning breakup of the iconic manufacturer founded by Thomas Edison and whose sprawling businesses once made it the world's most valuable company.

The company will spin off its health-care business in early 2023 and combine its renewable energy, fossil-fuel power and digital units into a single energy-focused entity that will be spun off a year later, the company said on Tuesday.

Credit default swaps tied to GE rallied to their best levels in more than three years on Tuesday morning in New York, implying that investors see less risk in owning the company's debt in the years ahead.

GE has been slashing its debt since chief executive officer Larry Culp took the helm in 2018. Large asset disposals, including the US$30 billion sale of its aircraft leasing unit to AerCap Holdings earlier this year, are helping GE achieve that goal. The firm reported US$65.8 billion of debt as of Sept 30, down from US$134.6 billion at the end of 2017.

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