GM gets new credit lines totaling $11B

Associated Press Modified: November 5, 2012 at 5:45 pm •  Published: November 5, 2012
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DETROIT (AP) — General Motors is boosting its cash with $11 billion in new credit lines, a move that could mean the automaker is preparing to buy back its shares from the government.

The company said Monday it acquired the credit from 35 financial institutions in 14 countries. It now has more than $42 billion in available cash and credit.

GM wouldn't say specifically what it plans to do with the money, only that it's a source of "backup liquidity" that may be used for "strategic initiatives."

But industry analysts said GM could be hoarding the cash to buy back stock, specifically from the U.S. government. The U.S. Treasury Department owns 26.5 percent of General Motors Co. It received the sake in exchange for a $49.5 billion bailout about four years ago.

In a note to investors, Barclays analyst Brian Johnson suggested GM should use the bulk of its cash to gradually buy back its shares.

"We, and other investors, would view a share buyback as the best use of cash in the near-term," he wrote.

Analysts said GM could also use the cash to pay for a restructuring of GM's troubled European operations, buy Ally Financial's European auto finance division or further fund its pension plans. Government-controlled Ally is GM's former financing arm.

GM says the new lines have more favorable terms than its old one and will allow it to borrow in different currencies.

Two of the three New York debt-rating agencies, Moody Investors Service and Standard & Poor's, quickly gave the GM credit lines an investment-grade rating on Monday.

But that doesn't mean GM's overall corporate credit rating changed from junk status. S&P's corporate rating on GM remains at "BB+," the highest junk rating. Moody's kept the corporate rating at "Ba1," also one notch below investment grade. Moody's has given GM a positive outlook and said it remains on track to return to investment grade within the next year.

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