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GM Announces $14.5 Billion Credit Facility, Receives Baa3 Rating from Moody’s

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Today General Motors announced the execution of an unsecured $14.5 billion revolving credit facility, which will consist of both a $10.5 billion five-year facility and a $4.0 billion three-year facility.  The facility is meant to amend as well as extend the company’s currently existent $12.5 billion revolving credit facility.

“We believe this larger revolver, along with our $20 billion target cash, will provide appropriate liquidity to enable consistent investment in a downturn to generate strong results,” said Chuck Stevens, who serves as GM’s executive vice president and chief financial officer. “In addition, we will also have the financial flexibility within the revolver for potential opportunities that may emerge to advance our strategic plan.”

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The company reports that it has reaffirmed its capital allocation framework, which includes targets for cash of $20 billion and available liquidity of $30 to $35 billion, which would be needed in the case of a severe economic downturn. The company also confirmed available free-cash flow will continue to fund buybacks executed under its common stock share repurchase program.

GM is also touting the fact that a total of 44 financial institutions representing 13 different countries participated in the broadly syndicated transaction, which the company sees as “underscoring the global scope” of its operations.

Moody’s Investors Service has already assigned a Baa3 rating to GM’s new credit facility, not affecting the company’s Ba1 senior unsecured rating.

“GM’s Baa3 credit facility rating and its Ba1 senior unsecured ratings are supported by the company’s increasingly competitive operations in North America, its strong position in the still-growing Chinese market, and the likelihood that it will achieve breakeven performance in Europe,” declared Moody’s in its “Ratings Rationale.”

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“The ratings are also supported by the operating and financial disciplines that GM has continued to embrace,” the “Rationale” continued. “These disciplines include: 1) maintaining a North American breakeven level that we calculate at 2.3 million units compared with wholesale shipments of 3.6 million units for the LTM through March 2016; 2) progress in consolidating its production among fewer global platforms; 3) maintaining an adequate liquidity profile within the highly cyclical automotive market; and 4) making the initial investments necessary to contend with industry’s evolving landscape of electric vehicles, ride sharing, driverless vehicles, connectivity and increasing regulatory constraints.”