GE 2015 Annual Report Download - page 107

MD&A FINANCIAL RESOURCES AND LIQUIDITY
GE 2015 FORM 10-K 79
FINANCIAL RESOURCES AND LIQUIDITY
LIQUIDITY AND BORROWINGS
We maintain a strong focus on liquidity. At both GE and GE Capital we manage our liquidity to help provide access to sufficient funding
to meet our business needs and financial obligations throughout business cycles.
Our liquidity and borrowing plans for GE and GE Capital are established within the context of our annual financial and strategic planning
processes. At GE, our liquidity and funding plans take into account the liquidity necessary to fund our operating commitments, which
include primarily purchase obligations for inventory and equipment, payroll and general expenses (including pension funding). We also
take into account our capital allocation and growth objectives, including paying dividends, repurchasing shares, investing in research
and development and acquiring industrial businesses. At GE, we rely primarily on cash generated through our operating activities, any
dividend payments from GE Capital, and also have historically maintained a commercial paper program that we regularly use to fund
operations in the U.S., principally within the quarters.
GE Capital has historically relied on the unsecured term debt markets, the global commercial paper markets, deposits, secured funding,
retail funding products, bank borrowings and securitizations to fund its balance sheet. Subsequent to April 10, 2015 and with the
execution of the GE Capital Exit Plan, we do not plan to issue any incremental GE Capital senior unsecured term debt for four
years. Furthermore we have reduced our commercial paper from $25 billion to $5 billion as of December 31, 2015 and with our
executed and current disposition plans we have substantially reduced our reliance on deposits and securitization. Today, we mainly rely
on excess cash positions, cash generated through dispositions, and the cash flow from our Verticals business to fund our debt
maturities and our operating and interest expense costs. GE &DSLWDO¶V liquidity position is targeted to meet its obligations under both
normal and stressed conditions. We expect to maintain an elevated liquidity position as we generate cash from asset sales, returning to
more normalized levels in 2019. During this period we expect to have excess interest costs as asset sales outpace our debt maturities.
While we maintain elevated liquidity levels, we may engage in liability management actions, such as buying back debt, based on market
and economic conditions in order to reduce our excess interest costs. In 2015, we repurchased $1 billion of long-term unsecured debt.
In addition, we repurchased $0.8 billion of debt for which we had the right to call.
Our 2016 GE Capital funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion
of long-term debt ($42.6 billion at December 31, 2015), principally through dispositions, asset sales and cash on hand. Long-term
maturities and early redemptions were $41.3 billion in 2015.
We maintain a detailed liquidity policy for GE Capital that requires GE Capital to maintain a contingency funding plan. The liquidity
policy defines GE &DSLWDO¶V liquidity risk tolerance under different stress scenarios based on its liquidity sources and also establishes
procedures to escalate potential issues. We actively monitor GE &DSLWDO¶V access to funding markets and its liquidity profile through
tracking external indicators and testing various stress scenarios. The contingency funding plan provides a framework for handling
market disruptions and establishes escalation procedures in the event that such events or circumstances arise. GE Capital will continue
to evaluate the need to modify the existing contingency funding plan due to the GE Capital Exit Plan.
As part of the GE Capital Exit Plan, on September 21, 2015 GE Capital commenced private offers to exchange up to $30 billion of
certain outstanding debt for new notes with maturities of six months, five years, ten years or twenty years. On October 19, 2015, given
the high level of participation, the offering was increased by $6 billion with the aggregate principal amount of $36 billion (representing
$31 billion of outstanding principal and $5 billion of premium) of outstanding notes being tendered for exchange and settled on October
26, 2015. The new notes that were issued at closing are composed of $15.3 billion of 0.964% Six Month Notes due April 2016, £0.8
billion of 1.363% Six Month Notes due April 2016, $6.1 billion of 2.342% Notes due 2020, $2.0 billion of 3.373% Notes due 2025 and
$11.5 billion of 4.418% Notes due 2035. Of the $16.2 billion exchanged into Six Month Notes, $1.3 billion had been in short-term
borrowings. GE Capital will continue to evaluate the opportunity to repurchase debt while maintaining our liquidity at the levels
communicated as part of the GE Capital Exit Plan. The new notes have been fully, irrevocably and unconditionally guaranteed by GE.
On December 2, 2015, $87.7 billion of senior unsecured notes and $4.9 billion of commercial paper was assumed by GE upon its
merger with GE Capital. See Note 10 to the consolidated financial statements.
On May 28, 2015, GE issued ¼ million senior unsecured debt, composed of ¼ million of Floating Rate Notes due 2020, ¼
million of 1.250% Notes due 2023 and ¼ million of 1.875% Notes due 2027. On October 9, 2015, $2.0 billion of long-term debt
issued by GE matured.
GE 2015 FORM 10-K 79