GE Rating Cut May Restart Breakup Debate: Analyst

NEW YORK ( TheStreet) - General Electric ( GE)'s likely reduced credit rating may once again lead to questions over whether to separate its industrial and financial units into separate companies as a result of a threatened downgrade, according to one analyst who follows the company.

On Tuesday, Moody's Investors Service put the ratings of General Electric and its finance subsidiary, General Electric Capital Corp (GECC) on review for possible downgrade. Both are currently rated Aa2.

"The review is based on Moody's view that finance companies have higher risks than previously considered, implying a wider gap between the risk profiles of GECC and GE's industrial businesses. This could result in Moody's determining that the GE and GECC ratings should no longer be equalized," Moody's stated in its press release.

"GE's liquidity and capital position have never been stronger. Moody's review has nothing to do with our credit position, but rather a change in their methodology," wrote GE spokesman Andrew Williams via e-mail.

Nick Heymann, analyst at William Blair & Co., said following the announcement that he would be "more curious than ever as to whether this actually bring up the question that's forever been put to bed 150 times, which is could you ever see an environment after the elections, post tax reform and everything else where perhaps GE Capital didn't make as much sense being hooked into GE?"

The review "raises the opportunity for that to be evaluated probably as another possible consideration," Heymann said.

-- Written by Dan Freed in New York.

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