GE should be down severly -no?

[wtabacchi]

One article mentioned GE is a major creditor to Northwest airlines to the tune of 1 billion $ why doesn't the share price reflect this?

Is it possible the loan is so secured that GE can't loose?

Will

[nodoodahs]

Considering that (1) they are one of the largest lendors and (2) their debt is secured by physical assets, I would say the impact is negligible.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[HenryTo]

Here is one article's take on it:
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GE seen unscathed by possible airline bankruptcies
Wed Sep 14, 2005 03:44 PM ET
By Daisuke Wakabayashi

BOSTON, Sept 14 (Reuters) - As two of America's largest airlines teetered on the edge of bankruptcy, investors and analysts said on Wednesday that General Electric Co. (GE.N: Quote, Profile, Research) , the world's largest aircraft leasing firm, will escape unscathed.

GE has nearly $3 billion in outstanding loans to Northwest Airlines Corp. (NWAC.O: Quote, Profile, Research) and Delta Air Lines Inc (DAL.N: Quote, Profile, Research) , the third- and fourth-largest U.S. airlines, with planes, engines and other parts securing those debts.

Nicholas Heymann, analyst at Prudential Equity Group, wrote in a note to clients on Wednesday that a Chapter 11 filing from those carriers would in fact be a positive factor for GE since it secures those debts with assets equal to as much as three times the value of the loan.

"As one of the largest lenders to each carrier and having gone through more than 200 airline bankruptcy proceedings as a lender over the past three decades, we believe GE is very well positioned to insure its shareholders' interests are adequately protected," said Heymann, who has an "overweight" rating on GE with a stock price target of $45.

GE Aviation Financial Services, the transportation financing unit of GE Commercial Finance, has about $1.8 billion in outstanding loans to Delta and an additional $1 billion to Northwest.

Despite the troubles facing America's legacy air carriers, the global airline industry is rebounding strongly and there is enough demand for GE's transportation financing unit, also known as GECAS, to move any excess aircraft to a new customer.

"Overseas demand for airplanes is growing quite rapidly," said John Boland, principal at Maple Capital Management, which owns GE as one of its largest holdings.

"Any disruption that would occur domestically would be more than offset by simply transferring the planes to overseas buyers or leasing to overseas carriers."

Further, Boland said that new customers -- already feeling the pinch from high fuel costs -- might choose to refit the plane with one of GE's new more energy efficient jet engines.

Prudential's Heyman said GE may be able to secure better lease rates for those repossessed jets since the market for aircraft leasing is so tight now.

In an interview with Reuters in June, Henry Hubschman, the head of GECAS, said some available planes draw interest from as many as three or four airlines.

GE's commercial aircraft unit has a track record of building profits despite tough conditions at large U.S. carriers.

The business, which owns a fleet of 1,314 planes and assets of about $37 billion, expects net income to grow more than 20 percent in 2005 from $520 million in 2004, according to company data.

GE shares were down 23 cents late Wednesday afternoon to $34.05 on the New York Stock Exchange and are off nearly 7 percent year-to-date, underperforming the 2 percent decline in the Dow Jones industrial average and the 1 percent rise in the S&P 500 index over the same period. (Additional reporting by Christian Plumb in New York)

[nodoodahs]

Will,

Could you find and post/link the article? It would help to know exactly what kind of debt they hold for Northwest, that would allow us to game what the impact should be.

Some links on corporate bankruptcy:
http://www.investopedia.com/articles/01/120501.asp
http://www.investopedia.com/terms/s/secureddebt.asp
http://www.investopedia.com/terms/a/absolutepriority.asp

While GE holding a Billion$ in debt for a soon-to-be-bankrupt company sounds like a lot (I'd like them to owe me 0.01% of that!), it's not really a whole lot from GE's standpoint. They have about $13 billion in cash right now, and their net income last year was about $18 billion on revenues of $162 billion. If they get only fifty cents on the dollar, it'll be a drag of less than 3% on their net income - and they may get more than a 50% share of what's owed them.
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.