Did GE Capital Act Unethically By Selling $11 Billion Of Long-term Debt Without Telling Those Investors That A Few Days Later It Would Be Filing Documents To Prepare For Another $50 Billion Debt Offering?
GE Capital sold $11 billion in global bonds was, the second-biggest U.S. Issue ever as the company sought to lock in low financing costs before the economy recovers. GE could make this decision to sell another 50 billion on the heels of the 11 billion, they like some of the big corporations these days added fuel to the fire of public trust yet again
General Electric Capital, a division of General Electric, uses long-term debt extensively. In early 2002, GE Capital issued $11 billion in long-term debt to investors, then within days filed legal documents to prepare for another $50 billion long-term debt issue. As a result of the $50 billion filing, the price of the initial $11 billion offering declined (due to higher risk of more debt). Bill Gross, a manager of a bond investment fund, “denounced a ‘lack in candor’ related to GE’s recent debt deal. ‘It was the most recent and most egregious example of how bondholders are mistreated.’ Gross argued that GE was not forthright when GE Capital recently issued $11 billion in bonds, one of the largest issues ever from a U.S. Corporation. What bothered Gross is that three days after the issue the company announced its intention to sell as much as $50 billion in additional debt, warrants, preferred stock, guarantees, letters of credit and promissory notes at some future date.” In your opinion, did GE Capital act unethically by selling $11 billion of long-term debt without telling those investors that a few days later it would be filing documents to prepare for another $50 billion debt offering? "
