General Motors Company (GM) Plans To Pay $3.2 Billion To Buy Back Preferred Stock From The UAW

Posted Sep 23, 2013

General Motors Company (NYSE:GM) has announced a plan to pay $3 billion to buy back almost half of the preferred stock owned by the UAW Retiree Medical Benefits Trust.  GM will be issuing new debt financing to help fund the deal after negotiating a $3.2 billion purchase price on the preferred stock with the Voluntary Employees Beneficiary Association (VEBA) trust.

The new debt will be used for “general corporate purposes.”  GM did not say how much debt they would issue or the interest rate they expect to obtain.  GM is refinancing to lower the interest rate that they pay on the obligations.

General Motors Company (NYSE:GM) has agreed to pay a premium on the preferred stock to get out of having to pay the 9% annual dividend tied to these shares.  The trust acquired these shares as part of GM’s bankruptcy settlement in 2009.  General Motors Company (NYSE:GM) will be recording an $800 million charge on their third quarter earnings report as part of the deal.

General Motors Company (NYSE:GM) is paying $3.2 billion to buy the shares that was previously recorded at a $2.4 billion value on their balance sheet.  VEBA will own around $3.5 billion in preferred shares following the deal and the Canadian government will own $400 million in preferred shares.

[Source: Lansing State Journal]