GM plans to return to investment-grade status as it recently doubled its credit line to $11 billion.
GM recently announced it has finalized a new $11 billion revolving credit facility consisting of a $5.5 billion five-year facility and a $5.5 billion three-year facility. The new facility is aimed at replacing the automaker’s existing $5 billion credit facility secured in 2010 and was to mature in 2015.
“The new revolver provides a significant source of backup liquidity and financial flexibility, further bolstering our fortress balance sheet,” said Dan Ammann, GM’s chief financial officer. “This level of commitment from the global banking community represents a strong vote of confidence in the financial strength of our company.”
Several analysts think that GM plans to use the extra liquidity to purchase part of the government’s last 500 million shares in the company. In 2009, part of GM’s $49.5 billion bailout, the government held 61% stake in the company, which would now worth $12 billion. Brian A. Johnson, an analyst with Barclays Capital Inc., believes that the government will begin selling GM shares immediately after the elections.
GM said it has no plans to purchase the government’s shares, although at the end of the third quarter it has $31.6 billion in cash and debt of $5.6 billion. The automaker said it will use the money for general corporate purposes and to further reduce pension obligations.