When Will GE File for Bankruptcy?




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ORIGINAL POST

Posted by Ed 5 mths ago
https://wolfstreet.com/2018/11/02/what-general-electric-does-to-avoid-question-when-will-ge-file-for-bankruptcy/

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COMMENTS

Ed 4 mths ago
This is What Retail Investors Did with GE This Year as it Plunged

Lured by the siren song of a “buying opportunity” and a fat yield.

GE shares plunged another 10% this morning to a low of $8.15 before recovering a little. They’re now a big step closer to the Financial Criss low of $6.66, which had been the lowest since the early 1990s. And for most of the year, retail investors – as measured by clients of TD Ameritrade – were net buyers of GE and bought the dips, lured by the Wall Street siren song of a “buying opportunity” and a fat dividend yield.

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But that sacred dividend was unceremoniously slashed a second time while people were distracted by Halloween, to a penny this time, and the fat dividend yield suddenly is near-nothing. GE, which lost $23 billion in the third quarter based on a huge write-off, is in the process of dismantling itself to deal with its debts and stay alive, after “unlocking value” by blowing and wasting $152 billion in mostly borrowed cash since 2013 on buying back its own shares.

It now is buckling under $263 billion in liabilities, not counting any off-balance-sheet liabilities. Its accounting is being scrutinized by federal authorities, GE disclosed. And there are fears that some unknown unknowns might emerge. GE has been shedding divisions and assets to shrink itself to health, and as it is dismantling itself, there are fewer business units available to generate cashflow to pay for this debt.


This is What Retail Investors Did with GE This Year as it Plunged
by Wolf Richter • Nov 9, 2018 • 5 Comments
Lured by the siren song of a “buying opportunity” and a fat yield.
GE shares plunged another 10% this morning to a low of $8.15 before recovering a little. They’re now a big step closer to the Financial Criss low of $6.66, which had been the lowest since the early 1990s. And for most of the year, retail investors – as measured by clients of TD Ameritrade – were net buyers of GE and bought the dips, lured by the Wall Street siren song of a “buying opportunity” and a fat dividend yield.



But that sacred dividend was unceremoniously slashed a second time while people were distracted by Halloween, to a penny this time, and the fat dividend yield suddenly is near-nothing. GE, which lost $23 billion in the third quarter based on a huge write-off, is in the process of dismantling itself to deal with its debts and stay alive, after “unlocking value” by blowing and wasting $152 billion in mostly borrowed cash since 2013 on buying back its own shares.

It now is buckling under $263 billion in liabilities, not counting any off-balance-sheet liabilities. Its accounting is being scrutinized by federal authorities, GE disclosed. And there are fears that some unknown unknowns might emerge. GE has been shedding divisions and assets to shrink itself to health, and as it is dismantling itself, there are fewer business units available to generate cashflow to pay for this debt.



These liabilities are so huge in comparison to its remaining assets that when the $79 billion in “goodwill” and “other intangible assets” are excluded from its assets, GE is left with what we call “tangible equity” of negative $31 billion. In other words, this former icon of American industrial innovation and strength has been gutted by share buybacks. GE would be OK-ish today, if it had not wasted $152 billion on monstrous share buybacks to “unlock value” to please activist shareholders and Wall Street.

The plunge-du-jour has been triggered by a brutally hype-free note by JPMorgan Chase analyst Steve Tusa, which he accompanied with a cut in his share-price target to $6, the lowest among Wall Street analysts.

The report cited surging liabilities (see above), weakening cash-flow outlook, and lousy Q3 results on “almost all fronts,” including a 33% plunge in revenues at GE’s largest division, its power division. And then this (Bloomberg):

https://wolfstreet.com/2018/11/09/ge-plunges-what-retail-investors-did-with-general-electric/

Ed 4 mths ago
General Electric seeks 'urgent' asset sales to cut debt: CEO
https://www.reuters.com/article/us-ge-debt/general-electric-seeks-urgent-asset-sales-to-cut-debt-ceo-idUSKCN1NH1SO

GE CEO admits regular investors have fled the stock since he cut the dividend to a penny
https://www.cnbc.com/2018/11/12/ge-ceo-admits-regular-investors-have-fled-the-stock-since-he-cut-the-dividend.html

General Electric just plunged, and one chart watcher says the devil's in the details
https://www.cnbc.com/2018/11/12/general-electric-ge-just-plunged-strategist-says-devils-in-details.html

Ed 4 mths ago
General Electric struggles with a “sense of urgency.”
Though shares [GE] have already plunged so much, they nevertheless plunged another 6.9% today to $7.99 a share, after its brand-spanking new outsider CEO, Larry Culp, on the job for only six weeks, got on CNBC and declared boldly and with refreshing straightforwardness what everyone has known for a long time, that after $152 billion of share buybacks since 2013, GE has too much debt.

To avoid a debt restructuring and stay out of bankruptcy court, GE has to sell whatever it can to try to whittle down its debts. This has been the theme for a while. Now the company is doing it with “a sense of urgency,” he said. And he emphasized: “We have options.”

There’s GE’s healthcare business for which GE is considering an IPO, he said. And there’s Baker Hughes, which GE acquired at the worst possible time and needs to sell — on the principle of buy-high-sell-low — to “generate real cash to bring leverage down,” as he said.

But selling cash-flow-producing business units to pay down an overwhelming pile of debt cuts down on cash-flow producing business units the company still has to service the remaining debts. Dismantling an overindebted financialized industrial conglomerate is always ugly.

“It’s tough to play offense with the balance sheet in the shape that it is in,” Culp said. Shares are down 58% from a year ago because investors have figured that out a while ago.

https://wolfstreet.com/2018/11/12/fangman-come-re-unglued-debacles-sinks-goldman-sachs-apple-ge/

Ed 4 mths ago
Three weeks ago we reported that in the first nail to its investment grade coffin, GE had found itself completely shut out of the Commercial Paper market when Moody's downgraded its senior unsecured rating to Baa1, from A2, and downgraded the short-term rating to P-2, from P-1, making future sales of CP impossible. So, in lieu of CP access, GE said it would replace that funding with a net $40.8 billion of available credit facilities committed from banks. Or, as we explained "GE will now use its revolver, which carries a higher interest rate, to fund what it previously achieved using CP."

This transition in GE's reliance from commercial paper to revolver is not just a problem for GE, however, which now faces higher funding costs and encumbered assets: with the industrial conglomerate's business and operations deteriorating rapidly, GE has become a major headache for America's largest banks almost overnight.

As Bloomberg reports, the five biggest Wall Street firms have committed to lending at least $3.5 billion each to GE even as the industrial giant is facing rising concerns about its viability and the sustainability of its debt.


https://www.bloomberg.com/news/articles/2018-11-21/if-ge-taps-credit-lines-these-banks-must-come-up-with-billions

https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/ge%20exposure%2011.21.jpg

Ed 4 mths ago
GE Falls as Analyst Sees Fresh Warning Sign for Finance Arm

General Electric Co. shares took another dive on Monday, after Gordon Haskett analyst John Inch said the bankruptcy of helicopter lessor Waypoint Leasing could spell trouble for GE’s finance arm.

Inch highlighted Waypoint’s struggles amid an energy industry pullback in rotorcraft usage because of distress in the offshore oil and gas sector. Lessors have too much capacity and too little demand, Inch wrote in a note to clients.

https://www.bloomberg.com/news/articles/2018-11-26/ge-falls-as-analyst-flags-another-warning-sign-for-finance-arm




Why GE Is Tumbling Again

Not a day passes lately without GE stock getting hit by some unexpected development, and today was no exception.

GE shares, which are down 58% YTD, dropped over 2% on Monday, after sliding as much as 4.1% earlier in the session and approaching its financial crisis low of $6.66, following a research report by Gordon Haskett analyst John Inch which prompted fresh questions about the treatment of goodwill at GE Capital.

In his report, Inch flagged the bankruptcy of helicopter leasing company Waypoint Leasing, the result of ongoing distress in the offshore oil & gas sector, and said that major energy customers have reduced helicopter usage, resulting in challenging conditions in the helicopter leasing industry, with excess fleet capacity and lower demand.

https://www.zerohedge.com/news/2018-11-26/why-ge-tumbling-again

Ed 4 mths ago
Shares of General Electric Co. took a dive Friday, and flirted with their lowest close in a decade, after Deutsche Bank analyst Nicole DeBlase hacked her price target following a review of the struggling industrial conglomerate’s free cash flow position.

What could also be weighing on investor sentiment, The Wall Street Journal reported that former GE employees, interviewed by federal investigators, said accounting problems at the company’s legacy insurance business that led to a massive charge stemmed from lax managerial oversight and the ignoring of risks.

The stock GE, +0.07% tumbled as much as 6.8% to an intraday low of $5.40, before paring some losses in morning trade. Trading volume ballooned to over 78 million shares, making the stock the most actively traded by far on major U.S. exchanges, according to FactSet.

Deutsche Bank’s DeBlase cut her price target to $7, which is nearly 7% below current levels, from $11. That is now the second lowest target of the 22 Wall Street analysts surveyed by FactSet, above J.P. Morgan perma-bear analyst Stephen Tusa’s $6 target.

DeBlase said she cut her price target after taking time to digest everything she learned and didn’t learn from GE’s post-earnings conference call, and after fielding “plenty of investor queries” and feedback.

“The bad news is that in the bear case, GE Industrial [free cash flow] remains in negative territory throughout the forecast period, which extends to 2021,” DeBlase wrote in a note to clients.

It was worries about a cash crunch that led former-Chief Executive John Flannery to halve the dividend last year, and new CEO Lawrence Culp to slash the dividend to next to nothing last month.

https://www.marketwatch.com/story/ge-stock-flirts-with-fresh-lows-after-analyst-hacks-price-target-2018-11-30


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