By on October 22, 2012

GM wants to double its $5 billion revolving credit line. However, the junk credit rated company does not want to pay junk credit interest for it. “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,” GM CEO Dan Akerson told Bloomberg yesterday in Sao Paulo.

GM is rated Ba1 by Moody’s and BB+ at Standard & Poor’s, both junk bond ratings, but pretty good ones. Borrowing costs for high-yield, high-risk companies are at the lowest level in decades, and stood at 6.84 percent as of Oct. 18, says Bloomberg. GM wants to pay less.

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19 Comments on “GM Wants A Big Revolver For Less...”


  • avatar
    velvet fog

    “Kind of one of our goals” – Well is it or isn’t it? Show some leadership Capt. Queeg, either you support it or you don’t. Or are you leaving room to wiggle out of your commitment when you fail.

    • 0 avatar
      Type57SC

      It means that getting investment grade ratings is a goal, and getting a revolver priced as investment grade is the benefit of the rerating, so it is kind of the goal.

  • avatar
    acuraandy

    Typical and outrageous. When an individual has ‘junk credit’, they pay a higher interest rate (if they are able to obtain credit at all) on the loan. GM is a bunch of entitlement minded brats.

    Charge them 25% like most of their shareholders have to pay on their credit cards.

    • 0 avatar
      dash riprock

      Typical and outrageous.

      Well yes it is typical for an organization to strive to lower their costs for day to day financing. It would be outrageous to the shareholders if they did not.

      GM may be a bunch of entitled brats but this post has nothing in it to support that.

    • 0 avatar
      Type57SC

      Huh – What are you talking about? Junk bonds are those rated BB/Ba or lower. The term ‘junk’ is just relative to investment grade that retirement funds and the like are limited to.

      By the way, if you are borrowing off your credit card and paying 25%, you ought to go see a credit counseller pronto. there are better ways to fund yourself.

      • 0 avatar
        acuraandy

        @Type57:

        My credit is good. I was referring to my buddies who bought a $200k house while making $10/hr in the mid 2000s who eventually had to live off their credit cards…until the bills came due.

        I had the foresight to not do the same. Evidently the guys at RenCen (as well as a few of my friends) did not.

        Thus, I have better ‘cred’ than one of the biggest employers in Michigan….and Beijing. :)

  • avatar
    gslippy

    Extending their credit line – regardless of the rate – ought to be questioned. GM’s credit is tight for obvious reasons.

  • avatar
    Autobraz

    They are free to ask for whatever rate they want. The banks are free to say “No” (and maybe laugh after they leave).

  • avatar
    jkross22

    “GM wants to pay less.”

    Boy, I sure am glad that government managed bk cleaned up GM’s corporate culture and got them back on track so they can produce the best cars and trucks in the world.

  • avatar
    fredtal

    I’m looking to buy a house to retire and I would like a better credit rating too. Why does GM think they need to make this public?

  • avatar
    -Cole-

    Can’t believe Akerson said “kind of”. What a dip.

  • avatar

    rats want cheese, even with having to accept mold. GM won’t ever change and anyone who loans them money is out of their mind.

  • avatar
    mikey

    @oboylepr….Niether you, nor I,ever loaned GM a nickel. Our democratly elected governments did. At the end of it all, the provincial and federal governments, became share holders and still are.

    I believe your from Ontario, and you know what the current financial situation is here. I also know you have no time for the CAW….Fair enough.

    Just inagine where Ontario would be right now, if we had lost the CAW represented plants.What about our, oh so expensive social safety net? Who do you suppose was going to pay for the 100,000 or so that would have found themseves on welfare?

    You I both know the answer to those questions.

  • avatar
    acuraandy

    hey mikey:

    me thinks ive posted on one of your posts before, so ill keep it as short and sweet as possible.

    There is economic strife everywhere on earth at the moment. Our money is fake. Doesnt matter if its Canada, the States or Europe. As a result of that, when bills can’t be paid the loan is in default and, if the borrower borrows again, they will pay higher interest.

    It seems the guys running the ol’ General have forgotten that 2/3 of the North American continent paid (as for me, in protest) for their survival. At least FoMoCo ‘cut the fat’ on their own.

    Seems that Akerson just had to run to mommy and daddy when he blew too much $ €? at the bar to balance his bank account back in the day and expects the same now. Not to get political, but Fisker, Karma and A123 also come to mind…

    • 0 avatar
      mikey

      @acuraandy….Not for one moment, do I comprehend the world of high finance. I am aware of the many posters here that do. I was always taught that if make 10 bucks and spend 12, ya gotta get that fixed real fast.

      With the cash on hand, and the present credit line,I can’t understand why they need more.

      Though, I’m sure that there is many,far better educated than I, that could find away to jusify it.

    • 0 avatar
      rnc

      ” Fisker, Karma and A123 also come to mind” – GM doesn’t want the DOE loans (they are incredible restricted and require you to spend $0.66 of your own money for every $0.33 of the loans amount used”

      GM wants larger revolver at lower rate (revolver loans (lets say $5 billion) works like this – You give the lender all of you’re free cash flow (i.e. Accounts received are transferred to the institution and when you need monies you present a disbursement list and the institution transfers that amount back). The benefit is you are only paying interest on the amount that you have used to disburse, the (-) is that the institution receives the interest from the funds transferred in. GM is probably using tje revolver loan to finance its inhouse financing and wants to double it at a lower rate so they can offer more attractive financing. (payroll would be another possible use, when a BS says a company has $20 billion in cash, usually 95(+)% of it is tied up in short-term securities and revolver/money market loans are used to cover 99% of day to day funding.


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