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Akerson: GM wants investment-grade interest rate for expanded credit line

Akerson: GM wants investment-grade interest rate for expanded credit line
Tim Higgins
Automotive News | October 22, 2012 – 10:21 am EST

SAO PAULO (Bloomberg) — General Motors Co., which has junk credit ratings, aims to double its revolving credit line to $10 billion at the same interest rates as if it were an investment-grade company, CEO Dan Akerson said.
“We think we can get it priced as if we’re investment grade, which is kind of one of our goals going into 2013, to achieve investment grade,” Akerson said Sunday here in an interview in advance of the Sao Paulo show, which begins with press conferences today.
Securing access to lending at investment-grade interest rates would signal that the lending markets see GM’s turnaround plan as a success. GM, which went through government-backed bankruptcy reorganization in 2009, earned an annual record of $9.19 billion profit last year and reclaimed its title of world’s top-selling automaker from Toyota Motor Corp.
Doubling the credit line would give GM capacity similar to Ford Motor Co., which has $9.3 billion in revolving credit lines.
“We look at other companies our size, not only in the industry — Ford — but outside the industry. And with the amount of global operations, I think it’s a good insurance to have,” Akerson said. It would not be for funding pension liabilities, he said.
GM has “substantial cash requirements going forward,” including pension obligations and reinvesting in operations, according to an Aug. 3 GM regulatory filing.
Akerson declined to say when GM may close on its new credit line. “We’ve had good meetings with the banks,” he said.
Lowest rates
Borrowing costs for high-yield, high-risk companies are at the lowest level in decades. GM is rated Ba1 by Moody’s Investors Service and BB+ at Standard & Poor’s, the highest speculative grade for each.
GM had $32.6 billion in automotive cash and marketable securities on hand on June 30. It also has a $5 billion revolving credit line that was set up in October 2010.
“Old rule of thumb for a CFO: Get liquidity when you don’t need it,” Matthew Stover, an analyst with Guggenheim Securities LLC in Boston, said in an e-mail in August.
“GM’s revolver is a bit small for a company its size, money is cheap and who knows what the rest of the year holds,” such as a possible deepening financial crisis in Europe.

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