trending Market Intelligence /marketintelligence/en/news-insights/trending/LPS1VOgts099OdzRkmLU3A2 content esgSubNav
In This List

Fitch says GE's credit profile outlook intact despite fraud allegations

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Fitch says GE's credit profile outlook intact despite fraud allegations

Fitch Ratings said a report alleging financial irregularities at General Electric Co. "has not substantially altered" its projections for and view of the conglomerate's credit profile.

Earlier in August, fraud investigator Harry Markopolos accused GE of running a decadeslong accounting fraud to conceal the extent of its financial woes, including an $18.5 billion reserve hole in its long-term care, or LTC, insurance business.

Fitch said Markopolos' findings are "valid topics of discussion" regarding GE's credit profile, although the rating agency does not agree with many of the whistleblower's conclusions, which GE also rebutted after the report was released.

"Fitch already considers these topics in its ratings for GE, and some are highlighted as risks supporting the current negative rating outlook," said the rating agency, which recently ranked GE among the insurers that are under-reserved against LTC losses.

The rating agency said LTC liabilities pose a risk to GE but are not the primary driver of the company's ratings. The key issues, according to Fitch, are cash generation and liquidity.

Fitch, which affirmed GE's long-term issuer default rating at BBB+ in June, maintained its forecasts that the company's free cash flow would become positive in 2020 and that leverage at GE Capital would fall to 4.0x-4.5x by the end of 2020.

GE shares were down more than 1% shortly after 2 p.m. ET.