UPDATE 4-GE Capital sells $6.5 bln of FDIC-backed debt sale

(Updates with final pricing)

NEW YORK, Dec 4 (Reuters) - General Electric's (GE.N) finance arm on Thursday sold $6.5 billion in debt backed by the Federal Deposit Insurance Corp, pushing total debt under the program to more than $51 billion.

GE Capital added $1 billion to an originally planned $5.5 billion sale on Thursday afternoon, selling 18-month floating rate notes priced to yield 40 basis points over the 3-month London interbank offered rate (Libor), according to IFR, a Thomson Reuters service.

The company also sold $1 billion in two-year floating-rate notes, priced at 63 basis points over the three-month Libor, according to IFR.

It also sold a tranche of $1 billion of three-year floating-rate notes at three-month Libor plus 93 basis points, and a tranche of $3.5 billion of three-year fixed-rate notes at midswaps plus 93 basis points.

The debt is being sold under the government's Temporary Liquidity Guarantee Program, which is filling a financing gap for banks shut out of the corporate bond market by skyrocketing yields.

Backed by the Federal Deposit Insurance Corp (FDIC), the debt has garnered top triple-A ratings, lowering borrowing costs dramatically for participating banks.

"The primary point to be made for the issuers is that it gives them access to the market, and prior to this they didn't have access," said Spencer Lee, head of the trading desk at SCM Advisors in San Francisco.

Investors for their part are attracted by the government guarantee.

"Many folks think that it could in fact be a tighter guarantee than what Fannie Mae and Freddie Mac have, on paper at least," said Lee. "Their indentures are back from a time before they were put into conservatorship, so they don't have the official language that these new bonds have."

Though there will likely be ample demand for the new asset class, future issues may run into problems with "oversaturation" in three-year maturities, Lee added. Companies have mostly sold debt that matures in three years because the government's guarantee ends at that time.

GE Capital, however, added 18-month and two-year maturities to its original plans for three-year debt.

GE Capital's offering is being managed by Bank of America Securities, Barclays, Citigroup, Goldman Sachs and Morgan Stanley. Pricing is expected later on Thursday. (Reporting by Ciara Linnane and Dena Aubin; Additional reporting by Karen Brettell, Editing by Jonathan Oatis)