Securitization - GE tries something different

Yesterday GE removed 2 million accounts from its securitized master trust to shore up its performance and the accounts were mainly from their private label credit card portfolio. Its a rare event for any such a business and it tells about the proactive steps GE is taking to ensure the funds flow in future.

GE private label credit card business, under GE Money brand, is a leading player with more than 60 billion in assets. The portfolio includes private label cards for JC Penney, Wal Mart, Gap, Lowes and a number of other retailers. Securitization was always a significant source for GE for funds but due to the nature of their portfolio ( Storecards have some subprime customers) , the delinquencies in their trust went up to 10.58% recently. It was still maintaining a spread of 8% to investors (Thanks to the 26% finance charges and other fees ) but seems GE is worried about the spread getting thinner and the investor confidence in those instruments.

GE tried to sell this portfolio in 2008 but due to financial crisis and probably aversion for sub prime portfolios, it could not find a buyer . Now GE says they are going to keep it so maintaining the confidence on their securitized instruments is very vital to their access to funds.

This news is particularly interesting as a credibility building exercise from a major corporation.