GE's finance arm launches $10 bln FDIC-backed debt

By Dena Aubin

NEW YORK, Jan 5 (Reuters) - General Electric Co's (GE.N) finance arm on Monday launched a $10 billion sale of FDIC-backed debt, the largest sale under the government guarantee program since its inception last November.

The General Electric Capital Corp sale will push total issuance under the government program to over $115 billion, according to Thomson Reuters data. Before GE Capital's deal, the largest sale under the program was $9 billion on Dec. 1 from Bank of America (BAC.N), according to Thomson Reuters data.

The so-called Temporary Liquidity Guarantee Program was created in November to fill a financing gap for banks shut out of the corporate bond market by skyrocketing yields. The new asset class is being sold to a combination of traditional corporate, agency and Treasury investors, strategists said.

"TLG paper has been widely accepted in the United States and is still catching on in Asia," Jim Vogel, a strategist at FTN Financial Capital Markets in Memphis, Tennessee, said in an emailed message. European investors also bought aggressively when spreads were wider relative to London interbank offered rates in early December, he said.

Despite top "AAA" ratings enjoyed by GE Capital, yields on its unsecured bonds had soared earlier this year amid worries that the credit crunch was making it more difficult for the massive finance company to roll over debt. GE Capital depends on easy access to funding to make loans for everything from office space to planes.

"They can borrow much more cheaply with the government guarantee, very simply," said Spencer Lee, head of trading at SCM Advisors in San Francisco.

Now is a good time for company debt sales, he added.

"You've got historically low Treasury yields despite the sell-off of last few days and tightening credit spreads."