General Motors Company (GM) is looking to double their line of credit to $10 billion according to The Detroit News. General Motors is planning to refinance a $5 billion line of credit that they secured in October 2010. GM has not tapped that line of credit yet. GM does not need any immediate cash.
At the end of June, GM had around $32.6 billion in cash and marketable securities on hand. This move may help GM secure investment-grade credit status from rating agencies. Ford has a $9 billion revolving line of credit and is rated at investment grade by two major rating firms. GM’s investment grade was raised from BB to BB+ by Fitch Ratings last month. GM is also taking advantage of low interest rates to secure access to more cash.
JPMorgan is leading the effort over the next 2 weeks and it will include a $5 billion (five-year revolver) and a $5 billion (three-year revolver). The final amounts may change depending on the market’s reaction. GM’s $5 billion line of credit is expiring in October 2015. GM needs some additional cash on hand to further reduce its pension obligations. GM offered pension buyouts to 42,000 of their 118,000 salaried pension plan participants and had transferred the plan to Prudential.
GM said that they are spending $3.5 billion to $4.5 billion on the buyouts and transfer. GM did not specify the exact cost or said that how many people agreed to buyouts. General Motors chairman and CEO Dan Akerson said in June that the company may propose a similar effort with their hourly pension participants. GM could also use the cash to buy part of the government’s remaining 500 million shares down the line.
The government initially had a 61% stake in GM as part of the $49.5 billion bailout. Based on the current price, it would cost around $12 billion to buy all of the remaining shares. The government does not plan on selling any further shares until after the election in November.
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