Understanding General Electric Corporate Bonds and Debt

Author

Reads 843

Airliner Airbus A320 in General Electric Livery Taxiing to the Runway
Credit: pexels.com, Airliner Airbus A320 in General Electric Livery Taxiing to the Runway

General Electric corporate bonds are a type of debt security issued by the company to raise capital. They offer a fixed rate of return to investors in exchange for lending money to the company.

GE corporate bonds typically have a longer maturity period than other debt securities, with some bonds maturing in 10 to 30 years. This longer maturity period can make them more attractive to investors seeking stable returns over the long term.

Investors can choose from various types of GE corporate bonds, including high-yield and investment-grade bonds. Investment-grade bonds are considered lower-risk, while high-yield bonds offer higher returns but come with a higher level of risk.

GE's corporate bonds are traded on various stock exchanges, including the New York Stock Exchange. This allows investors to buy and sell these bonds easily, making it simpler to invest in the company's debt.

GE Corporate Bond Overview

GE corporate bonds are issued by General Electric, a multinational conglomerate with a long history dating back to 1892.

Credit: youtube.com, Bonds (Corporate Bonds, Municipal Bonds, Government Bonds, etc.) Explained in One Minute

GE has a diverse range of bond offerings, including high-yield bonds, investment-grade bonds, and convertible bonds.

GE's corporate bonds have a relatively low default risk, thanks to the company's strong financial position and diversified business portfolio.

GE's bonds are highly liquid, with a large trading volume and a wide range of market makers.

GE's corporate bonds are available in various maturities, from short-term to long-term, giving investors flexibility in their investment horizon.

GE's bonds are listed on major exchanges, including the New York Stock Exchange and the London Stock Exchange.

GE Financial Performance

GE Financial Performance is a story of improvement. GE Aerospace has successfully reduced its short and long-term debt total from $2 billion to $1.9 billion.

The company's net debt has also decreased from -$11.6 billion to -$11 billion. This is a positive sign for investors.

GE's debt-to-equity ratio is 0.11, indicating that the company's debt is relatively low compared to its equity. This ratio is expected to remain stable at 0.10 next year.

Credit: youtube.com, Is General Electric (GE) Signaling That The Next Crisis In Corporate Bonds/Debt is Starting?

GE's interest debt per share is $2.79, which is expected to decrease to $2.65 next year. This reduction in interest debt per share is a result of the company's efforts to improve its financial performance.

Here is a summary of GE's financial performance:

GE's financial performance is a testament to the company's efforts to improve its balance sheet. The company's credit default swaps have decreased, and its dollar-denominated bonds are trading above 98 cents on the dollar.

Discount Rate and Cost of Equity

GE's Cost of Equity is a crucial metric in financial analysis, and it's calculated using the formula Risk-Free Rate + Beta x ERP. This formula gives us a Cost of Equity of 7.85% for GE.

The Risk-Free Rate, based on government bond yields, is a key component of this calculation and stands at 4.48%. This rate reflects the minimum return investors expect from a low-risk investment.

GE's Beta, which indicates the stock's volatility relative to the market, is 0.83. This means that GE's stock is less volatile than the market as a whole.

Credit: youtube.com, YIELD TO MATURITY WITH REAL LIFE EXAMPLES | GENERAL ELECTRIC BOND TRADING IN THE MARKET | CFA

The ERP, or excess return over the risk-free rate required by investors, adds an extra layer of complexity to the calculation and is 4.06% for GE. This is the premium investors demand for taking on additional risk.

This Cost of Equity is then used to calculate GE's Weighted Average Cost of Capital, or WACC, which is a critical measure in financial analysis.

GE Debt and Credit

GE's debt situation is a significant aspect of its corporate bond offerings. GE's total debt is substantial, with a short and long-term debt total of $25.7 billion, projected to decrease to $24.4 billion next year.

GE's net debt is actually negative, at -$11.6 billion, indicating that the company's cash and other assets exceed its liabilities. This could be a positive sign for investors, but it's essential to consider the company's overall financial health.

GE's debt-to-equity ratio is 0.11, indicating that the company's debt is relatively low compared to its equity. The debt-to-assets ratio is also low, at 0.02, suggesting that GE's assets are not heavily leveraged.

GE Aerospace and Financial Leverage

Credit: youtube.com, Hyman Lecture 05 Debt Commodification GE

GE Aerospace's financial leverage is a crucial aspect of its overall financial health. GE Aerospace's short and long-term debt total has been reported at $2 billion and is projected to be $1.9 billion for the next year.

The company's net debt has been a significant negative $11.6 billion, which is projected to decrease to -$11 billion for the next year. This suggests that GE Aerospace is actively working to reduce its debt burden.

GE Aerospace's short-term debt has been reported at $2 billion and is projected to remain at $1.9 billion for the next year. In contrast, its long-term debt has been reported at $17.2 billion and is projected to decrease to $16.4 billion.

The company's long-term debt total has been reported at $25.7 billion and is projected to decrease to $24.4 billion for the next year. This reduction in debt is a positive sign for GE Aerospace's financial health.

Credit: youtube.com, GE CEO on AerCap deal: Cash proceeds will allow us to pay down debt

Here is a summary of GE Aerospace's debt metrics:

GE Aerospace's interest debt per share has been reported at $2.79 and is projected to decrease to $2.65 for the next year. This reduction in interest debt is a positive sign for the company's financial health.

Ford Motor Credit, GE Debt

Ford Motor Credit was a significant contributor to GE's debt woes, with a $6.2 billion loan outstanding in 2008. This loan was part of a larger $23.5 billion deal.

GE's debt was also tied to its financing arm, GE Capital. In 2008, GE Capital had $417 billion in assets and $648 billion in liabilities.

The GE Capital loan to Ford Motor Credit was a non-recourse loan, meaning that GE would not have been able to seize Ford's assets to recover the debt. This type of loan is often used for large-scale financing deals.

GE's debt crisis was exacerbated by the 2008 financial crisis, which led to a decline in the value of its assets and a subsequent increase in its debt.

Frequently Asked Questions

What is the rating of General Electric bonds?

General Electric's senior unsecured debt and credit facilities have been upgraded to 'BBB+', indicating a moderate level of creditworthiness. This rating suggests that GE's bonds are considered investment-grade, but with some level of risk.

Are corporate bonds a good buy?

Corporate bonds can be a good investment option for those seeking income, offering average yields of 4.5% or more. However, their current yields are near the high end of a 15-year range, making it a strategic decision to consider.

How much do corporate bonds pay out?

Corporate bonds pay out a fixed annual amount, calculated as 5% of the $1,000 par value, which is $50 per bond. This payment is based on the bond's face value, not its purchase price or market value.

Matthew McKenzie

Lead Writer

Matthew McKenzie is a seasoned writer with a passion for finance and technology. He has honed his skills in crafting engaging content that educates and informs readers on various topics related to the stock market. Matthew's expertise lies in breaking down complex concepts into easily digestible information, making him a sought-after writer in the finance niche.

Love What You Read? Stay Updated!

Join our community for insights, tips, and more.