GE Capital to sell U.S.-guaranteed bonds: source

HONG KONG (Reuters) - GE Capital, the finance arm of U.S. conglomerate General Electric Co, plans to sell more bonds under a government guarantee program, a source involved in the deal said on Monday.

The benchmark-sized offering is expected to price early this week, said the source, declining to be identified because he was not authorized to disclose details about the sale.

Benchmark-sized offerings are typically at least $500 million.

Shares of GE slumped last week, leaving them down 59 percent for the year, on worries that GE Capital has not adequately reserved against an expected rise in delinquencies on its loans.

The bonds will be sold under the Temporary Liquidity Guarantee (TLG) program, which confers backing by the U.S. Federal Deposit Insurance Corporation on new bond issuance.

GE is rated AAA by Standard & Poor’s and Moody’s Investors Service, but both its bonds and those of its finance arm have plunged in value over financing concerns.

The TLG program was created in November to fill a financing gap for banks shut out of the corporate bond market by skyrocketing yields, as the global credit crunch was making it more difficult for firms to roll over debt.

GE Capital has mandated Citigroup, Credit Suisse, Goldman Sachs, JPMorgan and Morgan Stanley as underwriters for the sale, the source added.

Deutsche Bank, HSBC and Royal Bank of Scotland will also play roles.

GE Capital on Friday said it was offering to buy back up to $1.46 billion in bonds, according to International Financing Review.

According to GE’s latest annual report, GE Capital had about $510 billion of debt at the end of 2008, making it one of the largest borrowers in the corporate debt market.

Reporting by Rafael Nam; Editing by Kim Coghill