GE and the triple-A -- investors fret

By Scott Malone

BOSTON (Reuters) - As General Electric picks its way through the rubble of the worst financial crisis in decades, investors are wondering if the U.S. conglomerate's triple-A rating could be vulnerable.

Losing that top-shelf rating would cost GE, a company long regarded as the bluest of blue-chip stocks, more than just bragging rights. It would drive up borrowing costs for its hefty finance arm at a time when the unit can ill afford more bad news.

GE is adamant that keeping its triple-A is a top priority, and Standard & Poor's and Moody's Investors Service reiterated their ratings on GE following its September sale of preferred stock to Warren Buffett's Berkshire Hathaway.

But that has not stopped Wall Street from worrying.

"There is a certain vulnerability to it," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors, which owns GE shares.

That is because GE Capital -- the sprawling finance arm with businesses ranging from investing in commercial real estate, to financing inventory at appliance retailers, to offering store credit cards -- is facing the risk of rising delinquencies due to a slowing economy.

"You could end up with the perfect storm where not only is the default rate rising but ... if they do lose the triple-A rating, then the funding cost is going to go up," Sorrentino explained.

That would squeeze margins at the troubled GE unit whose troubles brought on the stunning first-quarter earnings drop and were behind the company's subsequent cuts to its profit targets.