Ratings agency Moody’s has downgraded GE due to “severe deterioration” in its power unit.
The move came the same day that rival Siemens announced swingeing jobs cuts on the back of declining demand for power-plant equipment.
Moody’s said it was downgrading GE’s long-term ratings to A2 from A1, claiming GE was unlikely to use planned asset sales to pay down debt.
The agency pointed out that GE had used $25bn of proceeds from asset sales and GE Capital dividends to finance share buybacks in 2016 and 2017, as well as funding $10bn of acquisitions with debt.
Moody’s added that GE’s dividend was increasingly outweighing its “industrial cash flows.”
“The downgrades reflect the severe deterioration in the financial performance of GE’s Power segment that will last through at least 2019. Along with the challenges in the oil & gas business posed by continued weakness in the global oil field services industry and the downturn in the North American market for freight locomotives, GE has to contend with weak earnings and cash flows in several segments that represent in aggregate about 50% of expected revenues in 2017,” said Moody’s in a statement.
The announcement had little initial impact on GE’s bonds. Meanwhile, GE shares were down 0.25% in New York trading.