What does this 23 billion non cash charge for power mean ?
GE will sell it's power business ?
6 replies (most recent on top)
https://www.bloomberg.com/amp/news/articles/2018-10-02/ge-bonds-got-the-ratings-downgrade-traders-had-been-expecting
Already happening
Diwngraded to BBB+. 3 notches above junk, from AAA in 2007
A few thoughts:
-
They have stated the write down included Alstom items but others in legacy GE.
-
It continues to reflect items we bought and over paid for and it is adjusting for that value on our books.
-
It makes those who made the bad purchases look incompetent not necessarily the current CFO who had to make the correction to reflect reality not "Success theatre".
Jim Cramer yesterday said he feels bad for John Flannery who was handed a bad hand to fix, I have to agree.
GE had $84B of Goodwill as of 31 Dec 2017. This write down of $23B in Power is in addition to the GE Capitals's $15B for long term care insurance earlier in the year. I am not sure if the Capital long term care allocation reduced Goodwill or hit somewhere else. Assuming it landed somewhere else this is a 27.4% reduction in the underlying value of Goodwill and if Capital's long term care already reduced Goodwill it would mean that considering both that Goodwill would be down by 45.25%.
Just wondering when all of the bad news will be fully known and hoping this does not cause a negative impact to our pensions.
Yes all to do with the Alstom acquisition. No they are not selling power. I’d be worried if I was legacy alstom
Great final statement. Expect CFOs to leave or get promoted. F it up and get promoted happens all to often, particularly in GE. Doubt it will happen this time around. Look also for KPMG to be shown the door.
Not necessarily.
GE has on its balance sheet (under assets) something called goodwill. This is the premium assigned to its assets, brand name, acquired companies etc. Think Alston, Converteam.
With current troubles, accountants tell them they need to mark to market, true value of its assets.
This increases net liabilities and debt/equity ratio, which affects bond ratings, which in turn affects interest rates.
Cash flows were already bad. Now they are saying it is going to be -23B off next quarter, due to surprise devaluation of some assets. No different than 15B charge they took for long term care liability in GE Capital.
I don’t think they are cooking books, but these things make cfo look incompetent.
Expect CFOs to leave or get promoted.