By Dow Jones Business News, September 24, 2013, 05:14:00 PM EDT
By Jeff Bennett
General Motors Co. ( GM ) expanded its financial housecleaning Tuesday after the auto maker raised $4.5 billion through
its first major private sale of debt since the company's emergence from bankruptcy.
The auto maker will spend $3.2 billion of the proceeds generated from the placement of three series of senior
unsecured notes to repurchase 120 million shares of preferred shares held by the United Auto Workers union retiree
Additionally, GM said it will use another $1.2 billion to prepay, in full, its 7% notes held by the Canadian Auto
Workers' Union Health Care Trust. Those notes were due in periodic installments through 2018, including accrued
"We're taking advantage of a favorable market to lower our cost of capital, increase our financial flexibility and
further strengthen our fortress balance sheet," GM Chief Financial Officer Dan Ammann said in a statement.
Both transactions are expected to be accretive to GM's 2014 earnings by about 11 cents a share, or about $152 million
based on outstanding common shares. GM, however, will take a charge of $800 million in the third quarter of this year
associated with the repurchase of preferred shares.
The pricing of GM's senior unsecured notes included $1.5 billion of 3.5% notes due in 2018, $1.5 billion of 4.875%
notes due in 2023 and $1.5 billion of 6.25% notes due in 2043. The offering is expected to settle on Sept. 27.
GM announced Monday its intention to buy back $3.2 billion of preferred stock owned by the UAW health-care trust.
Credit-ratings firm Moody's Investor Services responded to the proposed transaction by moving GM to an investment-grade
debt rating, saying it expects the Detroit auto maker's competitive position and credit metrics would continue to
Moody's is the first of the three major U.S. credit-ratings agencies to lift the auto maker's rating from junk status.
Standard & Poor's and Fitch Ratings recently upgraded their outlook on the company, but haven't raised their rating.
Write to Jeff Bennett at Jeff.Bennett@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2013 Dow Jones & Company, Inc.