- Al Sharpton, Trayvon Martin’s parents rally against Fla. ‘stand your ground’ law
- Hillary Clinton campaign got illicit funds from D.C. scandal figure
- Obama administration backs off plan to cut prescription-drug program
- Tickets linked to stolen passports purchased by Iranian middleman
- More than 3,500 police planned for Boston Marathon
- Ottawa day care suspends 2-year-old for ‘outside’ cheese sandwich
- Liam Neeson tells NYC mayor to ‘man up’ in horse carriage fight
- Real-life Dr. Doolittle to reveal how to talk to animals
- Climate change could bring back smallpox, researchers say
- Shoe-bomb witness to speak from London at N.Y. trial
GM secures $11B in new credit lines
DETROIT — General Motors is boosting its cash with $11 billion in new credit lines, a move that could mean the automaker is preparing to buy back its shares from the federal government dating back to the 2009 bailout.
The company said Monday it acquired the credit from 35 financial institutions in 14 countries. It now has more than $42 billion in available cash and credit.
GM officials wouldn’t say specifically what they plan to do with the money, only that it’s a source of “backup liquidity” that may be used for “strategic initiatives.” But industry analysts said GM could be hoarding the cash to buy back stock, specifically from the U.S. government. The U.S. Treasury Department owns 26.5 percent of General Motors Co. It received the stake in exchange for a $49.5 billion bailout about four years ago.
In a note to investors, Barclays analyst Brian Johnson suggested GM should use the bulk of its cash to gradually buy back its shares.
“We, and other investors, would view a share-buyback as the best use of cash in the near-term,” he wrote.
Analysts said GM could also use the cash to pay for a restructuring of GM’s troubled European operations, buy Ally Financial’s European auto-finance division or further fund its pension plans. Government-controlled Ally is GM’s former financing arm.
Two of the three New York debt-rating agencies, Moody Investors Service and Standard & Poor’s, quickly gave the GM credit lines an investment-grade rating on Monday.
But that doesn’t mean GM’s overall corporate credit rating changed from junk status. S&P’s corporate rating on GM remains at “BB+,” the highest junk rating. Moody’s kept the corporate rating at “Ba1,” also one notch below investment grade. Moody’s has given GM a positive outlook and said it remains on track to return to investment grade within the next year.
GM’s new lines of credit include a three-year $5.5 billion facility and a five-year $5.5 billion line. They replace GM’s existing $5 billion credit line, which was set to expire in 2015. GM also has $31.6 billion in cash and securities.
Chief Financial Officer Dan Ammann said the lines are a vote of confidence in the company’s financial strength.
The automaker, known derisively as “Government Motors” for taking bailout money to avoid going under in 2008 and 2009, has long wanted the government to sell its stake and exit the business. But the government, which still owns 500 million GM shares, is waiting for the stock price to rise before making a move. The government is $27 billion in the hole on its investment, and to break even, GM shares would have to sell for $53.
At this point, they’re not even close. Shares fell 22 cents to close at $25.57 Monday.
It would cost GM nearly $12.8 billion to buy back all of the government’s shares at the current price.
Last week, GM announced a $1.48 billion third-quarter profit on strong North American earnings, big improvements in South America and strong earnings in international areas outside of China.
TWT Video Picks
By David Keene
Conference showed that the values Reagan cherished still endure
- Hillary Clinton campaign received funds from Jeffrey Thompson
- Kim Jong-un calls for execution of 33 Christians
- Unanimous Senate passes bill on military sex assault to give victims more say in prosecution
- Senate Democrats, Republicans spar over restoring unemployment benefits
- Bill Clinton poses for photo with Bunny Ranch prostitutes
- Atheists sue to remove 'Ground Zero Cross' from 9/11 museum
- U.S. pilot scares off Iranians with 'Top Gun'-worthy stunt: 'You really ought to go home'
- Sharyl Attkisson resigns from CBS after months of talks
- Mitch McConnell on beating tea party: 'We are going to crush them'
- DHS accused of holding U.S. citizen at airport, using emails to pry into her sex life
Pope Francis meets his 'mini-me'
Celebrity deaths in 2014
Winter storm hits states — again