March 4 (Bloomberg) -- General Electric Co. dropped for a fourth straight day in New York trading on investor concern that its finance unit may require more capital.

GE fell 32 cents, or 4.6 percent, to $6.69 at 4:15 p.m. in New York Stock Exchange composite trading. The Fairfield, Connecticut-based company told investors in an e-mail today that claims it needs to raise capital soon are just speculation, and the stock pared losses after earlier touching $5.73, the lowest price since December 1991.

General Electric may have to add funding into GE Capital, analysts including Jason Feldman of UBS AG and Nicholas Heymann of Sterne Agee & Leach Inc. told clients this week. The shares are also being driven down by selling from sovereign wealth funds expecting a downgrade of GE’s AAA debt rating, Pacific Investment Management Co.’s Bill Gross told CNBC television.

“The rub against GE at this point is they have been pretty slow to admit some problem assets” in the finance unit, said Peter Klein, senior portfolio manager at Cleveland-based Fifth Third Asset Management, which holds the shares among $18 billion under management. “If assets are impaired in some way you would like to know to that.”

Gross said GE’s situation “is nowhere comparable” to insurer American International Group Inc., which U.S. Federal Reserve Chairman Ben S. Bernanke said yesterday would require a fourth rescue by U.S. taxpayers.

“The market is beginning to anticipate a downgrade to double-A territory,” Gross told CNBC. “We believe even with the downgrade, it’s a viable, safe, liquid credit going forward.”

Possible Downgrade

GE, the biggest maker of jet engines and power turbines, cut its dividend Feb. 27 for the first time since 1938 to save $9 billion a year. That may not stave off debt-rating downgrades and the company may have to put more money into GE Capital, according to Feldman of UBS and Heymann of Sterne Agee & Leach.

“Recently claims have been made that GE will be required to raise new capital near term,” GE said in today’s e-mail. “This is pure speculation, is inaccurate and is not based on any input from our company. In the unexpected event that GE Capital requires additional equity, we have a number of options to satisfy that need without seeking external capital. ”

GE Chief Executive Officer Jeffrey Immelt, 53, has said he will shrink the finance unit to 30 percent of total profit this year, from about half in 2007. GE’s profit from continuing operations was $18.1 billion last year as its finance arm made $8.6 billion. The company has projected the unit will have a profit of $5 billion this year, above most analysts’ estimates.

Shares Decline

The company’s shares dropped 80 percent in the past year, wiping out about $264 billion in market value, as the recession and credit crisis eroded profit at GE Capital and undermined the value of real estate on its books.

The finance arm, in addition to helping customers buy GE’s industrial products, has divisions that include private-label credit cards, real estate, aircraft leasing, bankruptcy financing and mid-sized company lending. One concern is about mounting credit losses for consumer and business loans.

GE’s biggest shareholder, Capital Group Cos., raised its stake by 15 percent in the fourth quarter, leaving the fund manager with a possible paper loss of $920 million after the stock tumbled this year.

Capital Group funds, based in Los Angeles, bought 77.8 million shares of GE from October through December, according to data compiled by Bloomberg. Fidelity Investments, Dodge & Cox and T. Rowe Price Group Inc. also increased their holdings. GE’s stock has plummeted 59 percent in 2009.

Credit Default Swaps

The cost to protect against a default by GE’s finance division reached a record earlier today before recovering in later trading.

Traders of credit-default swaps protecting against a default by GE Capital Corp. for five years demanded 15 percent upfront in addition to 5 percent a year as of 3:13 p.m. in New York, according to broker Phoenix Partners Group. That’s down from a record 20 percent upfront in early trading. The annual cost of the contracts has soared the equivalent of 502 basis points from 446 basis points on Feb. 19. A basis point is 0.01 percentage point.

“The spread in the CDS market widened out to a disturbing level so there are still concerns about GE’s financial unit,” said Dan McMahon, director of equity trading at Raymond James Financial Inc. in New York. “That’s driving the stock lower.”

GE Capital’s $4 billion of 5.625 percent notes due in 2018 fell 2.69 cents to 77.5 cents on the dollar at 4:46 p.m. in New York, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The securities, which yield 9.3 percent, have dropped about 8 cents since GE slashed its dividend on Feb. 27.

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net.

Last Updated: March 4, 2009 17:31 EST