28/03/2024 12:35 PM

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GM reduces loan refinancing target, may pay up for new debt

NEW YORK (LPC) – General Motors Co (GM) will seek to extend maturities on US$6bn in revolving loans rather than refinance a US$16.5bn credit facility following discussions with its bank group during an unprecedented health crisis in the US.

FILE PHOTO: The GM logo is seen at the General Motors Assembly Plant in Ramos Arizpe, state of Coahuila, Mexico October 7, 2019. REUTERS/Daniel Becerril

The company originally went out to its JP Morgan and Citigroup-led bank group in early March requesting to push maturities on the US$16.5bn in revolving credit facilities as part of its regular-way liability management operations.

The transaction was meant to roll over maturities, but leave pricing unchanged, several sources familiar with the discussions said.

But GM’s decision to refinance came at a time when the company is facing a longer than expected shutdown of its plants and considerable revenue losses amid a crisis of extraordinary magnitude that has created a playing field much different from when it last underwent refinancing discussions in 2019.

Complicating negotiations further, the company decided to draw down US$16bn on its revolver on March 27 while the refinancing talks with its bank group were taking place.

“To shore up liquidity and strengthen its financial position due to global market uncertainty from the coronavirus pandemic,” the company said on March 24 about its plans to draw down the facility.

The originally proposed refinancing included a US$2bn 364-day loan and a US$4bn three-year loan. It also included a US$10.5bn, five-year facility, said several sources familiar with the original refinancing discussions.

The new plan is expected to only address the short-term maturities, including the US$2bn one-year loan, and the US$4bn three-year loan, the sources said.

The one-year loan is looking to pay 25bp undrawn, while the three-year loan may pay 40bp undrawn.

When fully drawn, the loans could pay 175bp over Libor, the sources familiar with the transaction said.

An option to convert the one-year revolving credit into a term loan after one year is also expected to be removed, the sources said.

GM’s 364-day loan currently pays 12.5bp undrawn, the three-year pays 15bp undrawn.

The drawn margin on the two facilities is 125bp over Libor.

The new refinancing plan will leave in place the US$10.5bn credit facility. Pricing on the five-year is expected to stay unchanged at 125bp over Libor and 17.5bp undrawn.

Commitments are due April 10.

GM also has a US$3bn revolving credit it entered into in January 2019 when it refinanced the other three tranches. The new loan increased the company’s borrowing capacity to US$19.5bn.

A Citigroup spokesperson declined to comment. Spokespeople for GM and JP Morgan did not immediately return requests for comment.

Reporting by Michelle Sierra; Editing by Kristen Haunss

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