General Electric Uses Biopharma Sale Proceeds to Cut Debt Pile


General Electric Co. (GE) said on Monday that it used part of the $20 billion in proceeds it generated from the sale of its biopharma business to reduce and refinance debt.

As part of its deleveraging plan, General Electric said it repaid $6 billion of its loan to finance unit GE Capital on April 1, using proceeds of the biopharma sale. In addition, the industrial conglomerate announced that GE Capital is issuing a tender for up to $9 billion in debt securities maturing in 2020. Separately, GE Capital repaid $4.7 billion of debt maturing in the first quarter of this year, the company said.

“With net proceeds of about $20 billion from the sale of BioPharma now in hand, we are taking swift actions to de-risk and de-lever our balance sheet and prudently manage our liquidity amid a challenging external environment,” said GE Chairman and CEO H. Lawrence Culp, Jr. “We continue to execute on our priorities, including solidifying our financial position by further reducing debt and improving our cash operations and management. We remain committed to achieving our leverage goals over time.”

Read more: General Electric Closes Biopharma Sale to Danaher

As of March 31, 2020, GE had $47 billion in consolidated cash, cash equivalents, and restricted cash. As part of its financial management process, General Electric said it is also refinancing a back-up credit facility that expires in 2021.

TipRanks data shows that Wall Street analysts are slightly cautious about recommending General Electric as 8 have a Buy rating on the stock and 7 have a Hold rating adding up to a Moderate Buy consensus rating. The average price target of $11.40 per share implies a 63% twelve-month gain, should the target be met. (See General Electric’s Stock Analysis on TipRanks).

Last week, General Electric disclosed that it expects adjusted 1Q EPS to be “materially below” its prior guidance on March 4, 2020 of about $0.10, and withdrew financial guidance for 2020. However, investors were encouraged by the anticipation that General Electric sees industrial free cash flow to be near the prior guidance of about negative $2 billion, according to preliminary figures.

General Electric is scheduled to hold its first-quarter earnings call on April 29.

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