Barely 24 hours after Culp became CEO
, S&P Global Ratings downgraded the credit ratings of GE (GE
) and GE Capital. Moody’s and Fitch warned they could do the same.
All three ratings firms cited GE’s elevated leverage and shrinking cash flows — an alarming trend exacerbated by serious problems at GE’s power division. GE said on Monday that plunging profit at GE Power
will cause the parent company to miss targets in 2018.
Over the years, GE has piled on tons of debt caused by poorly-timed deals
, a massive pension deficit
and misguided share buybacks.
Underscoring the scale of the problem, Moody’s said that GE’s “very elevated leverage” could lead it to downgrade the company’s rating by multiple notches. Ratings downgrades can make it more expensive for companies to borrow money.
The good news is that S&P updated its outlook on GE to “stable” because the firm expects leverage and cash flow will improve in the coming years.
Still, GE’s debt problems may force the company to reexamine its…