GE CFO Keith Sherin said today that the Company has taken the right steps to ensure that it is safe and secure in this environment and that he sees no need to raise additional capital. Mr. Sherin said GE’s financial services business expects to be profitable in the first quarter of 2009 and for the full year, and the Company will provide a detailed review of the financial services business the week of March 16 in a dedicated GE Capital meeting.
“We have taken a number of actions to make the Company stronger and safer. These actions have given us an incredibly strong liquidity position, including $45 billion in cash," Sherin said. “We have no triggers that we can see that would have any call on our cash in the short-term; and we have $60 billion of additional capacity available under the Temporary Loan Guarantee Program (TLGP). We've done 70% of the long-term debt we need for this year, and we're going to complete the remainder of 2009's funding needs in the near future. We have the capacity under TLGP to complete 2010's funding needs as well.
Mr. Sherin said he expects the financial services business to be profitable for the first quarter and full-year 2009, and he addressed questions on the Company’s position on cash generation and loss reserves: "Over a three-year period here, we expect GE Capital to be profitable, even after $35 billion of losses and impairments. We're looking today for GE’s total cash flow to be around $16 billion for the year. In our stress case we could be down in the $14 billion level. In either scenario, we can fund the company. If conditions were to deteriorate beyond what is in our stress scenario, we also have the option of scaling back originations in GE Capital to conserve cash and capital."
Mr. Sherin corrected some of the inaccuracies circulating in the market, including the rumor the Company has $45 billion in commercial mortgage backed securities (CMBS) that will need to be marked down, “I have no idea where that comes from. We don’t have $45 billion in CMBS. We have a $50 billion commercial real estate loan book. It's a senior secured position and we underwrite each individual property. We have about $34 billion of equity. That's the actual value of the properties, with over 80% of that with no third party debt.” The Company has $2.9 billion of CMBS in its investment portfolio, as reported in its 2008 10-K.
Mr. Sherin announced that GE would host a dedicated GE Capital investor meeting the week of March 16: “We will do a deep dive around the hot spots in the Company, including real estate, U.S. consumer, global mortgage with a focus on UK home lending, and central and eastern Europe exposure.” Mr. Sherin said the Company will also present the results of its stress test at the meeting to demonstrate the ability of its financial services business to absorb and handle losses even in this difficult environment.
Mr. Sherin also highlighted the strength of the Company’s industrial businesses, “We've got a big equipment backlog in the infrastructure businesses, and we have a huge services business. The long cycle energy business should have a very strong year. The technology infrastructure business and aviation are in a good position, mostly driven by the service business. Healthcare and NBC Universal will probably have a tough year.”
Mr. Sherin addressed these topics and others this morning on CNBC’s Squawk Box. The full video is available at www.cnbc.com. CNBC is part of NBC Universal, one of GE’s four business segments.
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GE (NYSE: GE) is a diversified infrastructure, finance and media company taking on the world’s toughest challenges. From aircraft engines and power generation to financial services, medical imaging, and television programming, GE operates in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.
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