General Electric Company GE launched an offer to exchange its previously issued multi-tranche preferred stock (Series A, B & C) for new 5% fixed-to-floating rate non-cumulative perpetual preferred stock (Series D). The new issuance offers a more economically attractive financial package for existing investors at better terms.
Moody's Investors Service has assigned an A3 rating to the new $5.9 billion Series D preferred stock issuance. A3 is an investment grade rating and implies the presence of low credit risk. The issue has not affected the company’s existing A1 rating for its senior unsecured debt.
The newly issued preferred stock will be a direct obligation of GE. GE’s finance subsidiary, GE Capital Global Holdings, LLC, which recently replaced the former GE Capital in a complex reorganization, will be indirectly responsible for the servicing of the security.
Although the aggregate value of the securities remains the same at $5.9 billion, the dividend rate on the same has been boosted by nearly 20%. Also, the redemption date will begin earlier for the new preferred stock than for each series of the old issue.
The move is part of a much bigger strategic plan of GE, as it aggressively scales back its banking operations and divests its financial assets in order to focus more on its industrial businesses. It will also be a major step in ultimately rendering GE Capital free of its designation of a systemically important financial institution.
GE presently carries a Zacks Rank #3 (Hold). Better-ranked stocks that are worth a look now include Leidos Holdings, Inc LDOS, carrying a Zacks Rank #1 (Strong Buy), along with The Boeing Company BA and General Dynamics Corporation GD, both carrying a Zacks Rank #2 (Buy).
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