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Debt ratings downgrades are supposed to be bad, but sometimes they are not so bad for shareholders. General Electric Co. (NYSE: GE) took a credit rating downgrade from Standard & Poor's Ratings Services this morning.
What is interesting is that this has been effectively telegraphed for nearly three months. The tone of the downgrade may also be much "less bad" than many were expecting. The downgrade was taken to 'AA+' from 'AAA.' The rating outlook is also now listed as Stable.
There had been rumors that a credit rating downgrade would be worse, and that a "negative" outlook might accompany the cut. In effect, this takes away the chances that another downgrade from S&P will be made in the near-term.
General Electric Capital Corporation was also lowered to 'AA+' from 'AAA,' but this does not affect the company's 'A-1+' short-term funding ratings. Its outlook is Stable.
S&P seems to have gone a bit further into why the rating was Stable, because the ratings cuts frequently beget more cuts. GE has followed up itself with a notation that this creates no significant operating or funding impacts. GE Capital was also noted as one of the only financial services companies in the world to even have a 'AA+' rating.
Shares are up 4% this morning to $8.85 in active trading. Now the only question is how long it will take Moody's and/or other ratings agencies to follow suit.
General Electric Capital Corporation was also lowered to 'AA+' from 'AAA,' but this does not affect the company's 'A-1+' short-term funding ratings. Its outlook is Stable.
S&P seems to have gone a bit further into why the rating was Stable, because the ratings cuts frequently beget more cuts. GE has followed up itself with a notation that this creates no significant operating or funding impacts. GE Capital was also noted as one of the only financial services companies in the world to even have a 'AA+' rating.
Shares are up 4% this morning to $8.85 in active trading. Now the only question is how long it will take Moody's and/or other ratings agencies to follow suit.
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