GE Capital (NYSE:GE) Marketing Subordinated Debt for Capital Ratios

The financial arm of General Electric (NYSE:GE) - GE Capital - will be marketing $2 billion of subordinated debt to prepare for required capital ratios required in accordance with the Dodd-Frank rules.

This will be the first time in six years the company has issued notes like this.

With General Electric having no capital needs at this time, consensus is the debt is to line itself up with capital ratios.

GE spokesman Russell Wilkerson said the notes should count as Tier 2 Capital. Wilkerson said GE believes the sale will “further strengthen our total risk based-capital, providing further flexibility in capital allocation decisions.”

The difference between Tier 1 and Tier 2 capital is Tier one includes securities, usually common stock, while Tier 2 uses a wider range of securities in case a business becomes insolvent.

General Electric's GE Capital has a goal of raising from $25 billion to $30 billion in long-term securities in 2011.

Wilkerson said GE has raised about $8 billion so far in 2011 to work toward meeting its goal.

“We believe this is an attractive environment in which to issue, and there will be strong demand from investors for this type of transaction,” he added.

Managing the sale of the debt will be Citigroup (NYSE:C), Goldman Sachs (NYSE:GS) and Barclays Capital (NYSE:BCS).