General Motors South Korea announced it redeemed about 700 billion won ($649 million) of preferred shares to avoid paying higher dividends.
GM Korea bought back the securities from creditors including Korea Development Bank late last year, after the dividend payout rose to 7 percent of the preferred stock’s $4,000 price from 2.5 percent, according to a company e-mail today sent to Bloomberg. The dividend increase is part of a deal in 2002, when the GM unit agreed to redeem all the preferred shares from creditors by 2017.
This latest purchase means the company redeemed half of the 325,414 preferred shares it had outstanding at the end of 2011, though GM Korea didn’t say how many preferred shares it bought back.
“The transaction was purely based on a decision to improve the financial status of the company. GM Korea will continue to buy back preferred shares according to the contract,” the company told Bloomberg.
GM’s plants in South Korea produce Chevrolet vehicles for the domestic market and for export to markets including Europe and South America. South Korea’s second largest carmaker, GM Korea inherited Daewoo Group’s automotive business. At first called GM Daewoo, it was later renamed GM Korea.