GE 2014 Annual Report Download - page 74

54 GE 2014 FORM 10-K
MD&A SEGMENT OPERATIONS | GE CAPITAL
SIGNIFICANT TRENDS & DEVELOPMENTS
ENDING NET INVESTMENT
We have communicated our goal of reducing GE Capital’s ENI, excluding liquidity, most recently targeting a balance of less
than $300 billion. ENI is a metric used by us to measure the total capital we have invested in our financial services business.
GE Capital’s ENI (excluding liquidity) was $363 billion at December 31, 2014. To achieve this goal, we are more aggressively
focusing our businesses on selective financial services products where we have deep domain experience, broad distribution,
the ability to earn a consistent return on capital and are competitively advantaged, while managing our overall balance sheet
size and risk. We have a strategy of exiting those businesses that are deemed to be non-strategic or that are underperforming.
We have completed a number of dispositions in our businesses in the past and will continue to evaluate options going forward.
Accordingly, in the short-term, as we reduce our ENI through exiting non-core businesses, the overall level of our net earnings
may be reduced, which potentially could include impairments, restructurings and other non-cash charges. However, over the
long-term, we believe that this strategy will improve our long-term performance through higher returns as we will have a larger
concentration of assets in our core businesses, as opposed to the underperforming or non-strategic assets we will be exiting;
reduce liquidity risk as we pay down outstanding debt and diversify our sources of funding (with less reliance on the global
commercial paper markets and an increase in alternative sources of funding such as deposits); and reduce capital
requirements while strengthening capital ratios. Additional information about our liquidity and how we manage this risk can be
found in the Financial Resources and Liquidity section of this Form 10-K Report.
The actions below are consistent with our strategy of reducing GECC ENI and investing in our core businesses.
OTHER TRENDS & DEVELOPMENTS
x Milestone Aviation – On January 30, 2015, GECAS acquired Milestone Aviation Group, a helicopter leasing business,
for approximately $1.8 billion.
x Budapest Bank – During the fourth quarter of 2014, we signed an agreement to sell our consumer finance business
Budapest Bank to Hungary’s government.
x GEMB – Nordic – During the fourth quarter of 2014, we completed the sale of GE Money Bank AB, our consumer finance
business in Sweden, Denmark and Norway (GEMB – Nordic) to Santander for proceeds of $2.3 billion.
x Synchrony Financial – On August 5, 2014, we completed the initial public offering (IPO) of our North American Retail
Finance business, Synchrony Financial, as a first step in a planned, staged exit from that business. Synchrony Financial
closed the IPO of 125 million shares of common stock at a price to the public of $23.00 per share and on September 3,
2014, Synchrony Financial issued an additional 3.5 million shares of common stock pursuant to an option granted to the
underwriters in the IPO (Underwriters’ Option). We received net proceeds from the IPO and the Underwriters’ Option of
$2.8 billion, which remain at Synchrony Financial. Following the closing of the IPO and the Underwriters’ Option, we
currently own approximately 85% of Synchrony Financial and as a result, GECC continues to consolidate the business.
The 15% is presented as noncontrolling interests. In addition, in August 2014, Synchrony Financial completed issuances
of $3.6 billion of senior unsecured debt with maturities up to 10 years and $8.0 billion of unsecured term loans maturing in
2019, and in October 2014 completed issuances of $0.8 billion unsecured term loans maturing in 2019 under the New
Bank Term Loan Facility with third party lenders. Subsequent to December 31, 2014 through February 13, 2015,
Synchrony Financial issued an additional $1.0 billion of senior unsecured debt maturing in 2020.
We are targeting to complete our exit from Synchrony Financial through a split-off transaction, by making a tax-free
distribution of our remaining interest in Synchrony Financial to electing GE stockholders in exchange for shares of GE’s
common stock. The split-off transaction would be subject to obtaining required bank regulatory approvals. We may also
decide to exit by selling or otherwise distributing or disposing of all or a portion of our remaining interest in the Synchrony
Financial shares.