Standard & Poor's said on Wednesday it was more likely than before to cut General Electric Co's credit rating in the next two years after activist investor Nelson Peltz's purchase of a $2.5 billion stake in the company.
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Peltz's Trian Fund Management, which unveiled its roughly 1 percent stake in GE on Monday, urged GE to explore more share buybacks including by taking on new debt.
S&P said in a report that Trian was advocating share buybacks "beyond our current expectations." Trian's move comes after GE management had already made statements that suggest it could adopt a less conservative financial policy, S&P said.
S&P revised its outlook on GE's credit rating to "negative" from "stable," meaning S&P may downgrade the credit rating in the next two years. S&P also affirmed its "AA+" corporate credit rating on GE.
"The negative outlook reflects our expectation that the company could potentially adopt a less conservative financial policy than we currently expect," S&P said in the report, adding that GE could eventually pursue buybacks "to an extent that significantly increases its leverage."
(Reporting by Lewis Krauskopf in New York)