General Electric Co.’s GE, -5.32% credit rating is headed toward a downgrade at S&P Global Ratings, which said the industrial conglomerate’s deal to combine its aircraft leasing business, GE Capital Aviation Services (GECAS), with AerCap Holdings NV AER, -5.91% increase GE’s debt leverage more than previously expected. S&P said it placed GE’s BBB+ rating on CreditWatch with negative implications, and expects a one-notch downgrade to BBB, which is two notches above “junk” status, in about 10 to 12 months. The GECAS deal is valued at more than $30 billion for GE, with proceeds expected to be used to reduce debt. However, the remaining assets of GE Capital, which S&P Global had previously treated as a captive finance unit, will be incorporated into GE, and is expected to increase GE’s debt leverage to about 6.0X. Meanwhile, fellow credit rating agency Moody’s Investors Service affirmed GE’s Baa1 credit rating, which is three notches above “junk,” and affirmed the negative outlook, while Fitch Ratings affirmed the BBB rating — 2 notches above “junk” — and stable outlook. GE’s stock, which fell 5.7% in midday trading, has gained 16.6% over the past three months, while the S&P 500 SPX, +0.73% has advanced 6.4%.
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