Essent Lenders....11/28

Now isn't GE Capital one of Essent's lenders?

From Barrons
November 19, 2008, 10:46 am
GE: Meaning
Well, If Not Always Doing Well
Posted by stockstowatchtoday_topeditor
GE SEES $2 BILLION CAPITAL FAT; RISK TO WIND?

General Electric (GE) has become the corporate embodiment of the description of a sometimes-wayward so-and-so in a Lyle Lovett song: not always good, but always possessed of good intentions. Two earnings warnings in a year. Insistence that it’s bedrock financial condition remained intact, even though it managed earnings by paying more than $30 a share in buybacks before raising new capital at $22 a share. Pointing to its triple-A credit rating as evidence of its ample liquidity before raising more capital from Warren Buffett, to whom it’s paying a 10% coupon.

The latest reposte from the company that Brings Good Things: Tuesday’s announcement of changes of its GE Capital unit. The move was aimed at saving $2billion. Again, well-intentioned. But, as Deutsche Bank asked in a research note Wednesday: where’s the savings coming from, exactly? Can the company demonstrate where it’s taking costs out of the structure to realize the savings? How does any manager cut risks in a credit crisis that’s fraught with risks?

The problems with financing aren’t limited to GE’s capital operation. There’s increasing chatter in the market, fanned by a Bloomberg report Wednesday, that some of the wind turbine installations that GE is selling into are being postponed because their operators can’t finance the projects. GE said it hasn’t seen any outright cancellations. But some of the anecdotes certainly raise questions. After all, T. Boone Pickens has made himself the populist leader of the wind-farm movement. But Pickens is an oil guy - at heart and in his investments. It’s not to say that he’s anything but sincere in his ambitions to spread the gospel of renewable power. But anybody seen what’s happened to the price of crude lately, and think that might have had some impact on someone like Boone Pickens’ ability to finance new projects?

There’s no crisis in the wind-farm projects, as yet. GE said that it has a ‘’strong” backlog of wind turbine equipment. But Theolia, the French maker of power plant equipment, earlier this week backed off its financial and operational forecasts. That not only validates concerns about the integrity of wind turbine budgets over the short term. On top of it, Theolia’s 80% decline in market valuation certainly suggested GE’s 17% stake in the French company is worth less than it paid for it, another investment that hasn’t worked out.

Meanwhile, GE has made the ”green” movement a big part of its corporate identity, including such messages in its marketing and corporate imaging efforts, as it moves away from its image as a merchant of appliances, an operation it’s selling. A failure in the wind turbine business - even though all power generation represents less than 20% of the company’s sales - would hurt. GE shares declined 3% Wednesday.

I never thought that GE would be just over 12.