February 26, 2019 / 10:57 PM / a year ago

GE CEO says company needs to reduce debt 'thoughtfully and soon'

FILE PHOTO: The logo of U.S. conglomerate General Electric is pictured at the company's site of its energy branch in Belfort, France, February 5, 2019. REUTERS/Vincent Kessler

(Reuters) - General Electric Co has too much debt and needs to reduce it “thoughtfully and soon”, Chief Executive Officer Lawrence Culp said in a letter to shareholders on Tuesday.

On Monday, the company said it would sell its biopharma business to Danaher Corp for $21.4 billion as the industrial conglomerate reduces its debt pile, which stood at $121 billion at the end of December.

Since taking over as CEO last year, Culp has taken a string of steps, including slashing the company’s dividend to just a penny a share and selling assets at the 126-year-old, Boston-based conglomerate.

"We have more options available to us down the line to generate cash to help bring down our leverage, including our remaining interests in Baker Hughes and Wabtec Corporation and continued flexibility for our go-forward Healthcare business," Culp wrote in the letter here

General Electric has reduced its stake in oil-services firm Baker Hughes and will sell nearly half of its healthcare unit, the company said.

“We intend to maintain a disciplined financial policy, targeting a sustainable credit rating in the single-A range ... ultimately a dividend level in line with our peers,” Culp said.

Culp made the power business one of his top priorities, reorganizing the division by separating gas-turbine business from units that make coal- and nuclear-fueled power plants, power grids and other equipment.

The company lost two-thirds of its market value in the last two years amid a series of operational and investment missteps.

“2019 will be a year of change for Power in particular,” Culp added.

Reporting by Uday Sampath and Ankur Banerjee in Bengaluru; Editing by Lisa Shumaker and Shinjini Ganguli

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