WASHINGTON - General Electric Co. lost its top credit rating from Standard & Poor's on Thursday over concerns of rising loan losses and lower earnings at its lending arm, GE Capital.
The long-expected ratings cut -- down one notch to 'AA+' from 'AAA' -- offered further proof that the financial crisis has shaken the foundation of one of the nation's biggest and traditionally most stable companies. In the past year, Fairfield, Conn.-based GE has posted disappointing earnings, seen loan losses grow and cut its dividend for the first time since the Great Depression. The loss of its pristine credit rating means the company, which makes loans and light bulbs and runs NBC, will likely pay more to borrow money.
Still, investors were relieved the ratings cut wasn't worse. GE shares rose $1.08, or 12.7 percent, to close at $9.57. That made them one of the biggest percentage gainers among companies on the Dow Jones industrial average.
Investors were also heartened by S&P's decision to raise GE's outlook to "stable" from "negative," making a further credit reduction unlikely in the next six to 12 months. Analysts said a ratings downgrade was already factored into GE's share price.
"This is good news as the market was expecting the downgrade and it removes a layer of uncertainty," said Deutsche Bank analyst Nigel Coe. He added that some GE watchers feared a rating as low as "AA-."
GE was one of just six nonfinancial companies to hold the "AAA" rating. GE also has huge industrial businesses that make jet engines, locomotives and wind turbines.
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