GE Selling Spreads to Bond Markets

By Matt Wirz 

General Electric Co. bonds fell sharply Tuesday, even as the company said it would raise around $4 billion in cash by selling up to 20% of its stake in oil-field-services company Baker Hughes, a GE Co.

The price of GE's widely traded 4.4% bond due 2035 fell about 2.5% to 82 cents on the dollar, with more than $433 million face amount of the debt changing hands, according to data from MarketAxess. The company accounted for three of the four most actively traded corporate bonds in U.S. debt markets, the data showed.

The decline in GE debt contrasted with a rebound in the company's shares triggered by the announced sale of the Baker Hughes stake. The shares had fallen as much as 10% Monday, when bond markets were closed for Veterans Day, and bond prices are still catching up to the cumulative loss of over 30% in the stock since early October.

As the price of GE's bonds fall, their yields rise, pushing up the cost the company must pay when trying to borrow new funds. Bonds issued by the company's finance arm GE Capital that come due in January 2020 now yield about 4.6%, up from 3.3% in August.

The higher implied borrowing cost reflects bond investors' fears about GE's dwindling cash as its core energy business struggles and charges pile up from GE Capital's insurance liabilities. The cost of protecting against a default on $10 million in GE debt through credit default swaps has roughly tripled in the past two months to about $199,000, according to data from MarketAxess.

GE does not plan to raise new debt until 2020 so the recent increase in its bond yields will not increase current interest expenses, a person familiar with the company said. The company plans to pay down debt through asset sales before returning to bond markets, the person said.

--Sam Goldfarb contributed to this article.

(END) Dow Jones Newswires

November 13, 2018 18:11 ET (23:11 GMT)

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