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GE Enters Into $15B Credit Facility, Stock Plunges Over 40% YTD

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April 21, 2020

General Electric (GE) has entered into a $15 billion senior unsecured credit facility with 32 banks.

This senior unsecured credit facility refinances and terminates GE’s prior $20 billion back-up revolving syndicated credit facility that was scheduled to mature in May 2021.

The credit facility matures on April 17, 2023, although GE can pay any amounts of the facility back before this date without premium or penalty.

According to the filing, extensions of credit under the credit facility can be used by GE for general corporate purposes.

The closing of this new facility also terminated GE’s $4 billion revolving syndicated credit facility that was scheduled to mature in December 2020, following the $20 billion sale of the BioPharma business on March 31.

GE shares have now plunged 42% year-to-date, with JP Morgan’s Stephen Tusa recently calling the stock “the most expensive value trap we have ever seen.”

The analyst warned investors that GE’s major aviation business may suffer long-term impairment and, “while the stock is down, so is [free cash flow], by 100%+, while leverage has gone up.”

He concluded that 2020-21 “may ultimately be the period of the most significant underperformance based on expectations at the end of ’18 versus what they are now.” As a result, the analyst slashed his price target from $7 to $5 (23% downside potential).

Overall, analysts rate GE stock Moderate Buy- with a fairly even split between hold and buy. Meanwhile the $11 average analyst price target indicates significant upside potential of 66%. (See GE stock analysis on TipRanks).

“We consider GE to be well-positioned for when the risk-on recovery rally starts in earnest” cheers Oppenheimer analyst Deane Dray. He notes that management has carried out a series of tough cost-cutting actions to mitigate the financial impact of the coronavirus pandemic, including furloughs of 50% of its Aviation engine manufacturing workforce.

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