GM bonds driven up to investment grade
General Motors (GM) bonds were raised above Ireland to investment grade for the first time in eight years and moved to continue paying back stakeholders from its 2009 bailout with plans to buy preferred shares held by a union health-care trust.
Moody's upgraded GM to Baa3 from Ba1 yesterday, citing new models for the US market, strength in China and what it calculates as $31bn of cash, including credit facilities. It marks the first time the carmaker has had an investment-grade rating since its predecessor lost the designation in 2005.
"GM has been on a steadily improving operational and financial trajectory since it emerged from bankruptcy," Moody's vice president Bruce Clar said in a statement.
"We think that the disciplines the company has embraced, combined with the strength of its US product portfolio and a healthy domestic market, will enable it to stay on that path."
GM said yesterday it would purchase 120 million preferred shares held by the United Auto Workers retiree medical trust for about $3.2bn, or $27 each. The deal is contingent on GM closing an offering of senior unsecured notes that it started yesterday, the Detroit-based carmaker said. It's the first unsecured borrowing by GM, separate from its finance subsidiary, since the 2009 bankruptcy. (Bloomberg)