GE 2015 Annual Report Download - page 61

MD&A CONSOLIDATED RESULTS
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REORGANIZATION AND EXCHANGE OFFERS
During December 2015, General Electric Capital Corporation merged into GE. The merger and creation of a new intermediate holding
company was part of a reorganization of GE Capital’s businesses (the Reorganization) pursuant to which GE separated GE Capital’s
international and U.S. operations. GE Capital’s international operations have been consolidated under a new international holding
company (GE Capital International Holdings Limited), which has a separate capital structure and is supervised by the U.K. Prudential
Regulation Authority. The Reorganization, debt exchange offers (as described below) and establishment of GE Capital International
Holdings Limited were intended, among other things, to establish an efficient and simplified capital structure that is satisfactory to GE
Capital’s regulators, a key step in terminating the nonbank SIFI designation for GE Capital. In addition, the debt exchange offers were
designed to align the liabilities of GE Capital International Holdings Limited to its assets from a maturity profile and liquidity standpoint,
taking into consideration asset sales, and where appropriate, shortening the maturity profile of targeted liabilities.
As part of the GE Capital Exit Plan, on September 21, 2015, GE Capital commenced private offers to exchange (the Exchange Offers)
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 the Six Month Notes, $1.3
billion had been previously classified 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.
Immediately prior to the Reorganization, GE Capital had $5.0 billion in aggregate liquidation preference of Series A, B and C preferred
stock outstanding. In connection with the Reorganization, on December 3, 2015, holders who previously held GE Capital preferred
stock were issued an aggregate liquidation preference of $5.9 billion of new GE Series A, B and C preferred stock. The Series A, B and
C preferred stock bear an initial fixed interest rate of 4.00%, 4.10% and 4.20%, respectively, through their initial call date and are
callable on June 15, 2022, December 15, 2022 and June 15, 2023, respectively. Subsequent to the call date, the Series A, B and C
preferred stock will bear a floating interest rate equal to three-month LIBOR plus 2.28%, 2.32% and 2.37%, respectively, thereafter.
Subsequent to the issuance of the preferred stock on December 3, 2015, in response to investor feedback, GE launched an exchange
offer on December 18, 2015 that allowed GE preferred stock investors to exchange their existing Series A, B and C preferred stock into
a Series D GE preferred stock. These Series D instruments bear an initial fixed interest rate of 5.00% through January 21, 2021, will
bear a floating rate equal to three-month LIBOR plus 3.33% thereafter and are callable on January 21, 2021. On January 20, 2016,
$2.7 billion of Series A, $2.0 billion of Series B and $1.0 billion of Series C were exchanged into $5.7 billion Series D GE preferred
stock. Following the exchange, $0.1 billion of Series A, $0.1 billion of Series B and $0.1 billion of Series C remain outstanding.
GUARANTEE
As part of the GE Capital Exit Plan, on April 10, 2015, GE and GE Capital entered into an amendment to their existing financial support
agreement. Under this amendment (the Amendment), the Company has provided a full and unconditional guarantee (the Guarantee) of
the payment of principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial
paper issued or guaranteed by GE Capital identified in the Amendment. In the aggregate, the Guarantee applied to approximately
$85.8 billion of GE Capital debt as of December 31, 2015. The Guarantee replaced the requirement that the Company make certain
income maintenance payments to GE Capital in certain circumstances. GE Capital’s U.S. public indentures were concurrently amended
to provide the full and unconditional guarantee by the Company set forth in the Guarantee.
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