Moody's Warns On GE Rating As Slumping Giant Faces Investors

New York, (APP - UrduPoint / Pakistan Point News - 26th Apr, 2018 ) :Moody's placed a negative outlook on General Electric's debt rating Wednesday due to increased legal costs even as executives pledged to turn the company around at a bruising annual shareholder meeting.

The ratings agency cited GE's announcement Friday that it was putting aside $1.5 billion in reserves to cover legal settlements connected to a subprime lending business it exited. The reserves put additional burdens on GE Capital, where the subprime unit had been managed.

While GE has high debt, Moody's said the company's finances were solid overall, and affirmed the ratings for GE and GE Capital, but both received a negative outlook. The parent company's support of GE Capital, including debt guarantees, meant the "equalization" of the ratings on the two units, Moody's said.

GE was the biggest loser in the Dow, falling 4.5 percent. But Moody's said that given the solid business outlook for GE, "cash flows will show steady improvements as restructuring and portfolio shaping initiatives start to yield gains." - Irate shareholders - Moody's statement came as GE executives got an earful from shareholders following a year in which the company slashed its dividend and saw its share price nosedive.

Chief executive John Flannery acknowledged that 2017 was "immensely disappointing" and pledged to turn the company around. "We're keenly aware of the pain our performance has caused," Flannery said.

"Our focus in 2018 is to earn back your trust." Flannery has trimmed costs, streamlined its board, revamped employee compensation and announced plans for some $20 billion in assets sale. The shareholder meeting was dominated by retired employees angered by cutbacks to health benefits and at the company's broader slump.

Several praised Flannery, but some criticized prior management and remaining board members who presided amid the company's slide over the last year. Flannery was gracious, but took issue with one particularly irate speaker who said GE was "an embarrassment," saying politely that he was still "extremely proud" of the company and confident it would have more triumphs ahead.

The most closely-watched issue up for a vote by shareholders was GE's decision to maintain auditor KPMG, but nearly two-thirds supported the company's stance.