General Electric Co. (GE) said it reopened portions of its prior debt offerings as it seeks to raise $3 billion in total proceeds to bump up its cash buffers to cope with the coronavirus crisis.
The company said the reopening was in “response to a reverse inquiry from a long-term strategic investor”. Shares rose 7.4% to $8.46 on Monday.
GE expects to use these proceeds to reduce shorter-duration debt, including repaying a portion of GE’s intercompany debt obligations to GE Capital and lower GE Capital’s outstanding debt obligations.
“The combination of transactions is expected to be leverage neutral over time,” the company said in a statement.
The move builds on a number of recent leverage-neutral actions that have improved GE’s near-term liquidity by extending $4.2 billion of industrial maturities and $4.4 billion of capital maturities to date. The company added that it remains committed to achieving its leverage goals over time.
Upon closing of the two offerings, both the GE notes and the GE Capital notes will rank pari passu with the outstanding existing and future senior unsecured debt of GE, the company said. Both offerings are expected to close on June 15 subject to satisfaction of customary closing conditions.
Shares in GE have been hit hard this year, dropping almost 30%. The decline is mostly on account of GE’s heavy dependency on the commercial aviation sector, which has come to an almost standstill during the coronavirus pandemic. GE announced last month that it is cutting 25% of the workforce at its aviation unit, which makes engines for Boeing (BA) and Airbus.
Meanwhile Citigroup analyst Andrew Kaplowitz this month kept a Buy rating on the stock with a $8 price target amid optimism that a recovery at GE Healthcare could be underway as COVID-19 supports an acceleration of the adoption of healthcare digital tools.
After hosting a virtual meeting with GE Healthcare CEO Kieran Murphy, the analyst tells investors that healthcare demand trends are improving faster than expected with China, in particular, largely "normalized".
Kaplowitz believes that longer-term, the "margin expansion runway in the business could remain substantial".
As the coronavirus pandemic is forcing a change in certain clinical practices, GE’s digital products related to remote patient monitoring and healthcare workflow have been amongst the tools deployed in dealing with the pandemic, Kaplowitz added.
The Street’s rating outlook for GE is currently split with 8 Buy and 7 Hold ratings, adding up to a Moderate Buy consensus. The average analyst price target of $8.66 per share indicates shares have a mere 2.4% upside potential over the coming year, following some recovery over the past month. (See GE stock analysis on TipRanks).
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