General Electric Co. (NYSE:GE) Restates Plans To Reduce Debt by 35% by 2023

General Electric Co. (NYSE:GE) has informed investors that more debt reductions could be on the way and clarified the plans to reduce and manage debt by 2023.

GE restates its 2021 forecast and debt reduction efforts

Last week the company restated its 2021 forecast and plans to sell its jet-leasing unit to AerCap Holdings NC (NYSE:AER) as part of its efforts to reduce its debt. Despite the announcements, the company’s shares dropped as investors continue to be unconvinced by the company’s turnaround efforts. However, on Wednesday, the company offered clarity regarding the efforts to calm the nerves of investors, which sent shares up.

The company’s total debt at the end of last year stood at $104 billion including at both the GE Capital and industrial business. General Electric said that it plans to reduce total debt to $70 billion by the end of 2021 after finalizing the deal to sell the GECAS unit to AerCap. The US conglomerate plans to pay down around $25 billion of its debt. By 2023 the Boston-based company expects to have reduced its debt to $45 billion.

At the end of 2021, the company expects its EBITDA ratio to be 6x after closing the GECAS/AerCap deal, which will still be high compared to other industry peers. Interestingly, the company expects to bring the ratio to below 2.5x by 2023, helped by debt pay down, economic recovery, and the $10-$15 billion GE will keep in the balance sheet.

GE has been trying to reduce debt since 2018

Since October 2018, GE CEO Larry Culp has taken several steps to reduce debt including slashing dividend to a penny and selling assets to reduce the company’s humongous debt, enhance cash position and simplify GE’s structure. The company wants to focus more on core business including, aviation, power, healthcare, and renewables.

Andrew Obin, a Bank of America analyst, was pleased with the efforts and believes the company can meet the debt reduction targets and improve profit margins in the future. He said that the company’s medium-term earnings rebound is based on aviation recovery.