GM mulls selling or mortgaging its headquarters

08 October 2008

After having a disastrous 2007 accumulating a loss of $38.7 billion and declaring a $15.5-billion loss in the second-quarter of August 2008, the world's largest auto maker, General Motors, is planning to lease or sell it headquarters, the Renaissance Centre, in Detroit, in order to increase its cash flow until 2010 by $15 billion.

The Renaissance Centre consists of seven interconnected towers, which boast a movie theatre, several restaurants and a hotel. The central tower, called the Detroit Marriott at the Renaissance Center  is, according to Wikipedia, the tallest all-hotel skyscaper in the Western Hemisphere and features the largest rooftop restaurant, Coach Insignia.

GM had originally purchased the Renaissance Centre in 1996 for $75 million. It then went in for a major restructuring by borrowing $500 million and had been leasing space in the premises, but in May it became the full owner by paying $626 million and ever since has been looking for ways to refinance the building. 

 The cash-strapped company, on the brink of bankruptcy and with a 'B Negative' rating from Standard and Poor's, is in discussions with the Detroit Police & Fire Retirement System for refinancing its headquarters or selling it if the refinance is not available, reports The Detroit News.

The city pension and Detroit Police and Fire Fund have in its coffers over $8 billion in assets between them, with the police and fire fund nearly $4.5 billion in assets and the general pension system nearly $3.9 billion, enabling them to finance several key downtown development projects in Detroit.

A $500-million loan from any of these funds would come at a very low interest rate compared to the extremely high interest rates that the market has to offer under the present economic scenario.

In 2006, the other automobile giant - Ford, had secured $23 billion from investments banks by putting nearly all its assets as collateral in a bid to turn the company around.