Posted on: Sunday 26 August, 2012 8:33
|GM in talks with banks to expand credit
General Motors Co., the largest US automaker, is in early stages of talks with banks about expanding its credit line by as much as $5 billion (Dh18.37 billion), a person familiar with the discussions said.
GM, based in Detroit, may seek $4 billion to $5 billion in additional revolving credit from some of the lenders that provided its current line of credit, the person said.
The automaker has “substantial cash requirements going forward,” including pension obligations and reinvesting in operations, according to an August 3 regulatory filing. GM had $32.6 billion in cash and marketable securities on hand on June 30. It also has a $5 billion revolving credit line that was set up in October 2010, according to the filing.
“While we do not believe that we will draw on the secured revolving credit facility to fund operating activities, the facility provides additional liquidity and financing flexibility,” GM said in the filing.
The company was revamped in a government-backed bankruptcy in 2009. GM in 2011 took back the title of the world’s top seller of cars and light trucks from Toyota Motor Corp. Chief executive officer Dan Akerson faces a slide in GM’s share of its home market to 18 per cent through July from 20 per cent a year earlier. Akerson also wants to end losses in Europe that have totalled $16.8 billion since 1999.
The negotiations about the new credit were reported earlier by the Wall Street Journal, which cited people with knowledge of the talk. The Journal also said GM hadn’t made an official request to banks.
Earlier on Saturday, GM’s issuer default rating was raised by Fitch Ratings to BB+, the highest non-investment level, from BB.
The change reflects GM’s “continued positive free cash flow generating capability” and “very low leverage,” Fitch said in a statement.
GM slipped 0.7 per cent to $21.18 at the close in New York. The automaker has slid 36 per cent since its November 2010 initial public offering. The US still holds a 32 per cent stake in the company.