The desire for more diverse funding sources may be the impetus for GE Capital Corp.’s first public offering of private-label credit card asset-backed securities, which are being sold to investors this month.
GE Capital Credit Card Master Note Trust, which was established last year, is making the offering of approximately $952 million of funds. The trust consists of $9.8 billion of receivables outstanding and approximately 19 million accounts.
Jesse Mann, a Fitch Inc. analyst who wrote a presale report on the securities, says big investors have suggested over the years that GE Capital rely less on short-term commercial paper and more on longer-term vehicles to fund its receivables.
In particular, Bill Gross, the founder and chief information office at the Newport Beach, Calif., bond company Pimco, criticized the General Electric Co. subsidiary in 2002 for overreliance on commercial paper — an observation that made waves in the market, Mr. Mann said.
GE Capital spokesman Peter Stack said the public offering should reach a broader market than in the past. He said the Stamford, Conn., company has offered private placement credit card securitizations for approximately six to eight years.
GE Capital runs the country’s second-largest private-label card business, according to The Nilson Report. At yearend GE Capital Consumer Card Co. reported U.S. receivables of $25.8 billion, which ranks it second behind Citigroup Inc.’s private-label card business.
GE’s worldwide card receivables approach $60 billion, according to the Asset Securitization Report, a Thomson Media publication.
According to Fitch, the average account age in the GE trust on offer was 98 months as of March 20. The average credit limit was $1,847. The majority of the receivables are generated by retail sales at J.C. Penney Co. Inc., Wal-Mart Stores Inc. and its Sam’s Club, Lowe’s Cos. Inc., and Gap Inc.’s Old Navy.
GE’s June 4 filing came just a week after GE received regulatory approval to securitize up to $5 billion of its private-label card receivables. Mr. Mann said that the $5 billion ceiling probably means that GE plans to offer more securities in the coming months.
Its entry into card securitizations would be welcomed by investors, he said. “GE is a strong seller-servicer, and this provides investors with exposure to a new name. It will be a good diversification play in the credit card market.”
