BOSTON (Reuters) - General Electric Co has secured the temporary backing of the Federal Deposit Insurance Corp for up to $139 billion of the debt of its finance arm, a spokesman said on Wednesday.
"We are eligible now and included in the FDIC temporary liquidity guarantee program," said Russell Wilkerson, a spokesman for the U.S. conglomerate.
"This allows us to source our debt competitively with other financial institutions that are eligible. It certainly helps put us on a level playing field with other issuers," he said, adding, "It's beneficial to us in the market and it's part of a very clear plan and a number of decisive steps here to strengthen our liquidity plan through this volatile time."
FDIC officials did not immediately respond to a call for comment.
GE shares closed down $1.52, or 8.5 percent, at $16.29 on the New York Stock Exchange. Earlier, they fell to $16.05, their lowest point in more than 11 years.
The cost of insuring GE's debt with credit-default swaps fell after reports of the FDIC move. The price to insure $10 million of GE debt for five years with credit-default swaps fell to $395,000 annually, down 7 percent from $425,000 earlier.
The Fairfield, Connecticut-based company has been hammered this year as the credit crunch has taken a heavy toll on its hefty GE Capital finance arm, which has businesses ranging from making loans to midsized companies to investing in commercial real estate.
The lockup of the credit markets and the collapse of Bear Stearns early this year prompted the company in April to report an unexpected quarterly loss that stunned Wall Street as it was unable to close real estate deals.
GE has since taken a number of steps to improve its liquidity, including selling $15 billion in additional shares -- with $3 billion in preferred stock going to billionaire Warren Buffett's Berkshire Hathaway Inc
The company, which also makes products ranging from jet engines to windmills and runs the NBC Universal media business, has moved to scale back its exposure to financial services, which it wants to reduce to about 40 percent of profit next year, down from half last year.
That is a target that some investors say could be achieved as a byproduct of the unit's troubles.
It has also working to reduce its reliance on the commercial-paper market.
GE management, led by Chief Executive Jeff Immelt, has contemplated, but not taken, more drastic steps, such as seeking a bank charter that would give it access to government lending channels.
(Reporting by Scott Malone in Boston, additional reporting by Ciara Linnane in New York; Editing by Brian Moss, Gary Hill)