Moodys Investors Service downgraded Monday the key debt rating of US conglomerate General Electric Co (GE), saying its risk profile has increased following financial turmoil. The "senior unsecured debt ratings" of GE and its financial arm GE Capital Corporation (GECC) and their subsidiaries, were downgraded to AA2 from AAA, Moodys said in a statement.
The rating assigned to debt that GECC issued under a guarantee program of the Federal Deposit Insurance Corporation (FDIC) was however affirmed at AAA. The Prime-1 short-term ratings of both GE and GECC were also affirmed. Moodys said the outlook for all GE and GECC ratings was stable. GEs primary credit risks were centered on its position as a major financial institution through GECC, the rating agency said.
"The rating downgrade reflects Moodys opinion that the risk profile of GECC has increased and is now reflective of credits rated in the mid-"A" category (formerly high "A") without considering support from GE," the statement said. "The increased risk profile stems from several concerns, including the long-term risks associated with GECCs wholesale funding model as well as the earnings volatility resulting from deteriorating asset-quality trends."
But Moodys said it believed that GEs industrial operations continued to have strong AAA characteristics. About two weeks ago, GE lost its top AAA credit rating as Standard & Poors downgraded the company, potentially affecting its borrowing costs. S&P said the main factor in the downgrade was the outlook for the companys financial arm which could face heavy losses from the global economic crisis stemming from a US home mortgage meltdown.