Capital Markets

GE Plans Paper Chase

The big conglomerate will support the Fed's short-term funding facility.
Stephen TaubOctober 24, 2008

The capital markets may receive a big boost next week, when General Electric Co. plans to tap the shaky commercial paper market.

The conglomerate, which is the biggest U.S. issuer of this short-term financing vehicle, has not decided how much money to borrow and will base that decision on customers’ needs for liquidity, according to Bloomberg News, citing an interview with GE spokesman Russell Wilkerson.

But the move signals the company’s support for the Federal Reserve’s recently announced commercial paper funding facility (CPFF), according to the wire service. “There is a role for us and other large issuers to play here in demonstrating that this action is good for the market and very important for the buyers of GE paper as it provides a secondary market,” Wilkerson told Bloomberg.

Under the Fed’s short-term funding facility, it will purchase three-month unsecured and asset-backed commercial paper. The Fed also recently said it would provide as much as $540 billion in loans to money-market funds, the biggest buyers of the debt.

“We are encouraged that many issuers have already registered in the program because that provides a signal to investors of greater liquidity support to this key financing market,” Fed spokesman Andrew Williams told Bloomberg.

Wilkerson told the wire service that large issuers such as GE Capital can help destigmatize the market by testing the facility.

“To ensure access and operability and to demonstrate our support for the Fed’s action, we plan to test the facility,” GE reportedly wrote in an E-mail to investors. “We believe the CPFF will strengthen confidence in the prime commercial paper market and encourage more term buying.”

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