General Motors Company
) announced the offering of senior unsecured notes for 5, 10 and
30-year periods. The company expects that the offering will close
by Sep 30, 2013.
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The offering will be made only to qualified institutional buyers
in the U.S., according to Rule 144A under the Securities Act of
1933. Outside the U.S., the offerings will be made in accordance
with Regulation S of the Securities Act.
General Motors will utilize the proceeds to repurchase 120
million shares of its Series A Preferred Stock from the UAW
Retiree Medical Benefits Trust (UAW VEBA). Remaining proceeds
will be used for other general corporate purposes.
Presently, UAW VEBA has 260 million shares of Series A Preferred
Stock of General Motors and Canada Holdings holds another 16
As a result of this share repurchase program, General Motors
needs to make an investment of around $3.2 billion or $27 per
share. The purchase price is at a premium to the liquidation
preference of $25 per share. The shares carry an annual
cumulative dividend rate of 9%.
This refinancing is expected to benefit the earnings of the
company and lower the interest expenses. In addition, the
interest paid on unsecured debt will have tax benefits. However,
the company will incur a charge of $0.8 billion in the third
quarter due to this repurchase program.
General Motors intends to redeem all the outstanding preferred
shares worth $6.9 billion, including those held by VEBA and
Canada Holdings by the end of 2014. As a result, the automaker
expects to have enough liquidity in future.
General Motors had cash and cash equivalents of $19.7 billion as
of Jun 30, 2013 compared with $18.4 billion as of Dec 31, 2012.
Total debt (Automotive and Financial) increased significantly to
$26.7 billion as of Jun 30, 2013 from $16.1 billion as of Dec 31,
2012. Consequently, debt-to-capitalization ratio increased to
41.1% as of Jun 30, 2013 from 30.7% at the end of 2012.
Currently, General Motors retains a Zacks Rank #3 (Hold). Other
stocks that are performing well in the industry include
Ford Motor Co.
Tesla Motors, Inc.
). Volkswagen carries a Zacks Rank #1 (Strong Buy), while Ford
and Tesla carry a Zacks Rank #2 (Buy).