It’s not that GM’s Korean Daewoo division doesn’t need more money. The problem is that the only bank willing to lend a dime, the Korean Development Bank, wants strings attached. Since GM came up with the cash to buy up Daewoo’s $413m rights offering, it says Daewoo is out of trouble for two more years. Or 18 months… depending on that troublesome global car market. Meanwhile, GM-Daewoo’s $5b worth of forward contracts will burn up $300m in cash every month, as the debt matures. Although KDB and GM-Daewoo’s other lenders refuse to roll any of that debt forward and have been firm about enacting safeguards before loaning the automaker more money, GM’s Nick Reilly says Daewoo can now negotiate from a position of relative strength. Emphasis on relative.
“Even though we may not need any cash, we would still like to have a credit line for the long term…KDB is one candidate for that,” Reilly tells The Wall Street Journal. “We will be still in talks with KDB for no urgency.” Because in the meantime GM can keep covering up Daewoo’s $3.6b annual cash burn with non-US bailout funds? Because this time Daewoo has the winning currency hedge numbers? (Daewoo previously lost $2.3b hedging). Or because GM will simply bear any burden to not lose control of its growth-market division? Either way, it’s hard to see how a $413m rights offering makes any difference at all when maturing debt alone slurps down $300m per month.