GE Capital Sells First FDIC Bonds in Asian Currency

General Electric Capital Corp., General Electric Co.’s finance arm, borrowed HK$1 billion ($129 million) with the first Federal Deposit Insurance Corp.-backed bonds sold in an Asian currency.

Stamford, Connecticut-based GE Capital sold three-year floating-rate notes paying 0.2 percentage point more than the three-month Hong Kong interbank offered rate, according to an e- mail sent to investors today. HSBC, a unit of HSBC Holdings Plc, managed the top investment grade-rated sale.

“The fact we have an issuer coming from afar reflects general comfort for the positive bond market fundamentals in this part of the world,” said Tim Condon, head of Asia research with ING Groep NV in Singapore. “You still have traditional investors who need to buy high-quality assets.”

The Washington-based FDIC, which oversees 8,384 U.S. institutions with $13.6 trillion in assets, in October agreed to guarantee financial companies’ bonds to help them survive more than $1 trillion of writedowns and losses and weather the global recession. Companies and governments have sold $11.7 billion of bonds in Asian currencies this year, 39 percent more than in the same period a year earlier, data compiled by Bloomberg show.

Bank deposits in Hong Kong rose 3.2 percent from a year earlier to HK$6.06 trillion at the end of 2008, according to the Hong Kong Monetary Authority. The city’s foreign currency reserves rose 20 percent to $182.5 billion, compared with an average of 3.1 percent growth for G-7 nations and a 13 percent decline in the U.S.

Relative Costs

GE Capital will pay interest of 1.15 percent on its Hong Kong dollar bonds after three-month Hibor was fixed at 0.95 percent today, Bloomberg data show.

The company’s $1 billion FDIC-backed floating-rate notes maturing in June 2012 pay 0.3 percentage point more than the London interbank offered rate while its 75 million pounds ($108 million) three-year guaranteed bonds pay 0.33 percentage point above pound sterling Libor. Three-month dollar Libor was fixed at 1.23 percent yesterday while pound Libor was at 2.16 percent.

Investors earned a return of 5.4 percent from Hong Kong dollar-denominated bonds in the past year, according to HSBC’s Local Bond Indices.

GE Capital’s Hong Kong sale adds to more than $24 billion the company has borrowed since Dec. 4 using the FDIC guarantee.

The U.S. government agreed in November to insure as much as $139 billion in debt for GE Capital to help it compete with banks already covered by the guarantee. The amount represented 125 percent of total senior unsecured debt outstanding as of Sept. 30 and maturing in by June 30, the company said on Nov. 12.

Russell Wilkerson, a spokesman for Fairfield, Connecticut- based GE, couldn’t be reached for comment outside U.S. business hours today.

Moody’s Investors Service on Jan. 27 said it may cut GE Capital’s long-term credit ratings due to “heightened uncertainty” about its asset quality and earnings. A downgrade wouldn’t affect FDIC-backed securities.

Source:- Bloomberg