GM said it plans to buy back almost half of the preferred shares owned by the UAW health care, offering $3.2 billion.
The US automaker said it will raise funds with a debt offering to finance the purchase of the 120 million Series A preferred stock owned by the United Auto Workers health care trust. GM did not offer any information on how much it will raise, but said that the debt would be 5,10 and 30-year senior unsecured notes.
GM predicts that the debt’s interest rates will be under the preferred shares’ 9% dividend, which would mean a payment of $620 million annually. So what GM is actually doing is to refinance some of its debt, by replacing the preferred shares with debt at lower cost.
The United Auto Workers health care trust got the preferred shares in 2009 as part of GM’s $49.5 billion restructuring and bankruptcy offered by the US government. There is currently a total of $6.9 billion worth preferred shares and the UAW trust owns $6.5 billion (260 million shares) and the rest of $400 million (16 million shares) is in the Canadian government’s hands. GM will be able to buy back those shares beginning December 31st, 2014 at $25 per share.