GE 2014 Annual Report Download - page 97

GE 2014 FORM 10-K 77
MD&A FINANCIAL RESOURCES AND LIQUIDITY
RATIO OF EARNINGS TO FIXED CHARGES, INCOME MAINTENANCE AGREEMENT AND
SUBORDINATED DEBENTURES
GE provides implicit and explicit support to GECC through commitments, capital contributions and operating support. For
example, and as discussed below, GE has committed to keep GECC’s ratio of earnings to fixed charges above a minimum
level. GECC’s credit rating is higher than it would be on a stand-alone basis as a result of this financial support. GECC
currently does not pay GE for this support.
Under an agreement between GE and GECC, GE will make payments to GECC, constituting additions to pre-tax income
under the agreement (which increases equity), to the extent necessary to cause the ratio of earnings to fixed charges of GECC
and consolidated affiliates (determined on a consolidated basis) to be not less than 1.10:1 for the period, as a single
aggregation, of each GECC fiscal year commencing with fiscal year 1991. GECC’s ratio of earnings to fixed charges was
1.84:1 for 2014. No payment for 2014 was required pursuant to this agreement. On February 24, 2015, GE and GECC
amended this agreement, effective beginning in 2015, to exclude non-cash charges attributable to goodwill and intangibles
(which are excluded from regulatory capital calculations) for purposes of calculating GECC’s ratio of earnings to fixed charges.
The amended agreement is filed as Exhibit 10(y) hereto and is hereby incorporated by reference.
In addition, in connection with certain subordinated debentures of GECC that may be classified as equity (hybrid debt), during
events of default or interest deferral periods under such subordinated debentures, GECC has agreed not to declare or pay any
dividends or distributions or make certain other payments with respect to its capital stock, and GE has agreed to promptly
return any payments made to GE in violation of this agreement. There were $7.1 billion of such debentures outstanding at
December 31, 2014. See Note 10 to the consolidated financial statements in this Form 10-K Report.