GM to draw down $4.5 billion revolving credit facilty, completes $322 million debt to equity exchange
23 Sep 2008
Mumbai: General Motors plans to draw down the remaining $3.5 billion of its $4.5 billion secured revolving credit facility to maintain a high level of financial flexibility for its ongoing restructuring during these uncertain times in the capital markets, the company announced yesterday. In addition, GM announced the completion of a $322 million debt to equity exchange.
The revolver draw will bolster the company's liquidity position. The proceeds from the draw would also be available to be used to retire $750 million of debt maturities coming due in October, and to pay Delphi Corporation in excess of $1.2 billion as part of its reorganisation efforts, assuming court approval of the revised agreements between GM and Delphi that were filed with the court on 12 September.
The $4.5 billion secured revolving credit facility was put in place in July 2006 with a consortium of banks and provides liquidity that GM can draw on from time to time to fund working capital and other needs.
In July, GM announced a plan to bolster liquidity through internal operating actions, asset sales and the capital markets due to the weak US economy, record high fuel prices, shifts in consumer vehicle preferences, and the lowest US industry sales volumes in a decade.. The internal operating elements of the plan remain on track and the company continues to look to opportunistically access the capital markets. (See: GM to cut thousands of jobs, save $15 billion under new restructuring plan)
At the end of the first quarter 2008, GM had liquidity of $23.9 billion, with access to US credit facilities of an additional $7 billion. In addition to the operating changes and other actions, GM expects to raise additional liquidity of $4-7 billion through asset sales and financing activities
As part of its capital market activities, GM has completed a debt to equity exchange which will improve GM's liquidity by reducing both its debt and its interest costs. GM issued 28.3 million new shares of its common stock in exchange for $322 million principal amount of its 1.5 per cent Series D Senior Convertible Debentures, which mature in June 2009.
