Reuters, JPM on GE Shrinking CP
Reuters writes "GE plan further shrinks its money market presence". The article says, "General Electric Co.'s plan to retrench from the finance business will further reduce its already diminishing presence in the U.S. money market, which it has leaned on to fund consumer and business loans. This development from a major issuer of U.S. commercial paper comes at time when tighter regulations have caused money market funds, which own most of the $1 trillion of ultra short-dated debt issued by banks, brokerages and commercial lenders, to cut their holdings. There was no significant reaction on Friday in the money market in the wake of GE's plan, which includes shedding $375 billion in GE Capital assets. As part of the overhaul, GE will also reduce the lending unit's commercial paper to $5 billion by the end of the year from $22 billion at the close of 2014, analysts and investors said." It adds, "GE Capital's commercial paper comprised 6.3 percent of its overall debt at the end of December, roughly half the percentage in mid-2007, before the global credit crisis, when it had about $60 billion in such debt.... The price on a GE Capital commercial paper issue that was issued last July and will mature April 17 was quoted at 99.9978, up fractionally from late on Thursday, according to Reuters data." J.P. Morgan Securities' latest "Short-Term Fixed Income" says, "To be sure, GE's announcement that it is planning to sell most of its GE Capital assets does not help the supply/demand imbalance in the money markets. Currently, GECC has one of the largest US CP programs in the market. With $22bn outstandings, they are one of 10 largest CP issuers. A look at GECC's historical CP balances shows that the company has already shrunk its program by 67% ($45bn) from its peak in 2007.... With today's announcement, the company anticipates reducing its unsecured CP balances to [approx.] $5bn by the end of 2015. This implies that $17bn of GECC CP will be removed from the market. For context, that represents about 2% of the total USCP market." Crane Data's latest Money Fund Portfolio Holdings data shows GE as the 46th largest Issuer to money market mutual funds with $7.6 billion in Commercial Paper and Other Notes (0.3% of taxable money fund assets).
