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GE’s Credit Rating at Risk

GE’s Credit Rating at RiskGE’s Credit Rating at Risk

General Electric Co.’s financial restatements call attention to risks that credit-rating firms won’t be able to ignore much longer, Bloomberg reported. The industrial giant, whose shares have plunged more than 20% this year as it grapples with the fallout from a deterioration in its cash flow, provided more details late Friday on the impact to 2016 and 2017 financials from accounting rules changes. New standards for revenue recognition and other adjustments will result in a roughly $2.5 billion reduction to GE’s 2017 industrial segment profit, more than what the company had estimated in November. It’s important to note that the restatements aren’t connected to the SEC investigation into the way GE accounts for long-term service contracts. Instead, the update is a fine-tuning of restatements GE has been flagging for a while now. But the official restated 2017 results should make it clear that GE’s 2018 outlook is unrealistic and will likely need to be walked back. On that basis, it’s hard to see how credit-rating companies can still be comfortable with their current outlooks.

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