GE 2005 Annual Report Download - page 57

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Beyond contractually committed lending agreements, other sources of liquidity include medium and long-
term funding, monetization, asset securitization, cash receipts from our lending and leasing activities, short-term
secured funding on global assets and potential sales of other assets.
PRINCIPAL DEBT CONDITIONS are described below.
The following two conditions relate to GE and GECS:
• Swap, forward and option contracts are required to be executed under master-netting agreements containing
mutual downgrade provisions that provide the ability of the counterparty to require assignment or termination if
the long-term credit rating of either GE or GECS were to fall below A-/A3. Had this provision been triggered at
December 31, 2005, we could have been required to disburse $2.2 billion.
• If GE Capital’ s ratio of earnings to fixed charges, which was 1.70:1 at the end of 2005, as restated, were to
deteriorate to 1.10:1 or, upon redemption of certain preferred stock, its ratio of debt to equity, which was 7.09:1
at the end of 2005, were to exceed 8:1, GE has committed to contribute capital to GE Capital. GE also has
guaranteed certain issuances of subordinated debt of GECS with a face amount of $1.0 billion at December 31,
2005 and 2004.
The following three conditions relate to consolidated, liquidating securitization entities:
• If the short-term credit rating of GE Capital or certain consolidated, liquidating securitization entities discussed
further in note 28 were to fall below A-1/P-1, GE Capital would be required to provide substitute liquidity for
those entities or provide funds to retire the outstanding commercial paper. The maximum net amount that GE
Capital would be required to provide in the event of such a downgrade is determined by contract, and amounted
to $12.8 billion at January 1, 2006. Amounts related to non-consolidated SPEs were $1.7 billion.
• If the long-term credit rating of GE Capital were to fall below AA/Aa2, GE Capital would be required to
provide substitute credit support or liquidate the consolidated, liquidating securitization entities. The maximum
amount that GE Capital would be required to substitute in the event of such a downgrade is determined by
contract, and amounted to $0.6 billion at December 31, 2005.
• For certain transactions, if the long-term credit rating of GE Capital were to fall below A/A2 or BBB+/Baa1 or
its short-term credit rating were to fall below A-2/P-2, GE Capital could be required to provide substitute credit
support or fund the undrawn commitment. GE Capital could be required to provide up to $2.0 billion in the
event of such a downgrade based on terms in effect at December 31, 2005.
One group of consolidated SPEs holds high quality investment securities funded by the issuance of GICs. If the
long-term credit rating of GE Capital were to fall below AA-/Aa3 or its short-term credit rating were to fall below
A-1+/P-1, GE Capital could be required to provide up to $4.1 billion of capital to such entities.
In our history, we have never violated any of the above conditions either at GE, GECS or GE Capital. We
believe that under any reasonable future economic developments, the likelihood that any such arrangements could
have a significant effect on our operations, cash flows or financial position is remote.