FAIRFIELD, Conn. (
continues to defend itself against allegations that it has a large capital holeit needs to fill.
Many GE watchers believe GE will need to raise additional capital to guard against future loan losses and to meet what are expected to be more stringent regulatory requirements for its GE Capital financial arm. The effect would potentially be a double whammy for GE, because it has been more lightly regulated than banks, which themselves can expect tighter regulation.
GE has repeatedly said it does not believe it needs to raise outside equity, but that has not stopped the rumor mill.
Doug Kass, a hedge fund manager at Seabreeze Partners, wrote on Friday that General Electric is eyeing an equity raise of $3 billion to $5 billion. Kass, who has a short position in GE, declined to elaborate when contacted via email.
The Wall Street Journal
wrote Friday that GE may consider a sale of its NBC Universal unit.
GE spokeswoman Anne Eisele said the company, as a policy, doesn't comment on "purported mergers, acquisitions, divestitures and the like" and reiterated it does "not foresee the need for
an outside capital raise."
"We have ability to increase our capital thru normal earnings (numerator), reduced asset base (denominator) and cash at parent if necessary," Eisele wrote in an email to
Despite the company's public proclamations, estimates of its capital needs among analysts and the media reveal a sizable hole.
A July article in
The Wall Street Journal
says GE's Tier I Capital ratio was "likely" 6.9% at the end of last year, below the 10.4% average for the four largest U.S. banks.
So if Eavis is correct, GE already would have to beef up its reserves to put it on par with the big banks. But then, like the banks, it would potentially need still more
if new standards supported by the Treasury Department go into effect.
said last week that banks should have larger capital cushions to guard against credit losses. In order to be meaningful, the adoption of the capital rules would require international cooperation. Regulators around the world typically follow the lead of the Basel Committee on Banking Supervision in Switzerland in deciding how much of a capital cushion to require banks to hold.
GE shares have rallied in recent days on upgrades from JPMorgan Chase and Goldman Sachs. The shares closed at $14.67 Friday, down less that 1% for the day.
But perhaps it is worth remembering to take what GE has to say with a grain of salt. After all, CEO Jeffrey Immelt was at one time adamant the company would not need to cut its dividend -- and GE investors know how that turned out.
Written by Dan Freed in New York