GE to Use Fed’s Commercial Paper Facility Next Week

By Rachel Layne and Scott Lanman

Oct. 23 (Bloomberg) -- General Electric Co., the biggest U.S. issuer of commercial paper, plans to use the Federal Reserve’s new short-term funding facility when it starts next week.

GE and its General Electric Capital Corp. finance arm registered as users of the Fed’s Commercial Paper Funding Facility, spokesman Russell Wilkerson confirmed today in a telephone interview. The company hasn’t set an amount that it plans to borrow and will base that decision on customers’ need for liquidity, he said.

“This is a way for us to demonstrate our support for what the Fed is doing, which is providing all-around liquidity,” Wilkerson said. “There is a role for us and other large issuers to play here in demonstrating that this action is good for the market and very important for the buyers of GE paper as it provides a secondary market.”

The Fed is seeking to stem the credit-market seizure and revive demand for commercial paper, short-term debt that companies use to finance their day-to-day operations, by offering to buy 90-day debt of top-rated companies. The central bank this week also said it would provide as much as $540 billion in loans to money-market funds, the biggest buyers of the debt. Companies cut back their short-term borrowing for the sixth-straight week, the Fed said today, as investors balked at taking on the debt.

“We are encouraged that many issuers have already registered in the program because that provides a signal to investors of greater liquidity support to this key financing market,” said Andrew Williams, a Fed spokesman in New York.

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“To ensure access and operability and to demonstrate our support for the Fed’s action, we plan to test the facility,” GE said in an e-mail to investors today. “We believe the CPFF will strengthen confidence in the prime commercial paper market and encourage more term buying.”

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