S&P revises GE credit outlook to negative after Peltz buys in

Wed Oct 7, 2015 5:23pm EDT
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(Reuters) - Standard & Poor's said on Wednesday it was more likely than before to cut General Electric Co's (GE.N: Quote) credit rating in the next two years after activist investor Nelson Peltz's purchase of a $2.5 billion stake in the company.

Peltz's Trian Fund Management, which unveiled its roughly 1 percent stake in GE on Monday, urged GE to explore more share buybacks including by taking on new debt.

S&P said in a report that Trian was advocating share buybacks "beyond our current expectations." Trian's move comes after GE management had already made statements that suggest it could adopt a less conservative financial policy, S&P said.

S&P revised its outlook on GE's credit rating to "negative" from "stable," meaning S&P may downgrade the credit rating in the next two years. S&P also affirmed its "AA+" corporate credit rating on GE.

"The negative outlook reflects our expectation that the company could potentially adopt a less conservative financial policy than we currently expect," S&P said in the report, adding that GE could eventually pursue buybacks "to an extent that significantly increases its leverage."

(Reporting by Lewis Krauskopf in New York)

The ticker symbol for General Electric is displayed on a screen on the floor of the New York Stock Exchange July 20, 2015. REUTERS/Brendan McDermid