Moody's lifts GM to Baa3 ahead of buyback
AFPNEW YORK CITY--Moody's upgraded General Motors debt to investment quality Monday as the biggest U.S. automaker said it would buy back US$3.2 billion in shares owned by the UAW union's trust.
September 25, 2013, 12:08 am TWN
GM said it had reached an agreement to repurchase 120 million shares of preferred stock from the UAW Retiree Medical Benefits Trust (UAW VEBA) at US$27 per share.
To help fund the buyback, GM said it was issuing five-, 10- and 30-year senior unsecured notes. The buyback agreement depends upon the closing of the offering by Sept. 30.
In reaction, Moody's upgraded the company's debt to investment grade, from Ba1 to Baa3, with a stable outlook.
The upgrade “reflects our expectation that GM's competitive position and credit metrics will continue to improve based on the strength of the company's new product introductions in a healthy U.S. market, its solid position in the increasingly important Chinese auto market, and its focus on maintaining a robust liquidity profile,” Moody's said in a statement.
“Good things happen when you build great cars and trucks and deliver strong financial results,” Dan Akerson, GM chairman and chief executive, said in a company statement.
“Today's news from Moody's further underscores that this is exactly what we are doing today.”
UAW VEBA currently holds 260 million shares of Series A Preferred Stock, while Canada Holdings owns an additional 16 million shares.
GM said it expected to take a third-quarter charge of about US$800 million for the share buyback.
GM shares were down 0.2 percent in late-morning trade in New York in an overall lower market.
U.S. and Canadian authorities rescued GM in the 2009 as the automaker plunged into insolvency during the financial crisis.