GE Unit Sells Bonds Direct to Investors

Marketing directly to investors represents a new way for GE Capital to generate funding. GE registered the necessary prospectus with the US Securities and Exchange Commission last week, according to news reports.

The news reports said the bond offering would be conducted through the Incapital InterNotes program, a two-year-old joint venture of Banc of America Securities and Incapital LLC. GE Capital is the latest of regular corporate debt market users to reach out to investors. Incapital’s President Tom Ricketts said $14.5 billion of InterNotes have been sold.

Investors must still purchase the securities through one of the some 325 broker-dealers who will participate. However, this transaction differs from traditional corporate bond offerings, in which the securities are largely purchased by banks, brokers, insurance companies and other large institutions and sold on a secondary market to the retail set, subject to prevailing price and yield swings, according to the news reports.

The GE Capital bonds are investment grade, meaning they carry the highest credit ratings from Moody’s and Standard & Poor’s. Investors must buy the debt at a minimum of $1,000 and in $1,000 increments. Maturities will range from nine months to 60 years, according to the SEC prospectus.

The companies offering direct-to-investor debt have been largely targeting investors ranging in age from 40 to 60 years old who usually hold onto their investments, needing them as an income source, according to the news reports.

GE Capital, which had $262 billion of debt as of September 30, is the eighth company to sell the bonds directly to consumers. Others are:

• Bank of America Corp,
• Boeing Co. unit Boeing Capital Corp.,
• CIT Group Inc.,
• DaimlerChrysler AG unit DaimlerChrysler North America Holding Corp.,
• Dow Chemical Co.
• Household International Inc. unit Household Finance Corp.
• Cendant Corp unit PHH Corp.