Fitch Rates General Motors Holdings' Secured Credit Facilities 'BBB-'

  Fitch Rates General Motors Holdings' Secured Credit Facilities 'BBB-'

Business Wire

CHICAGO -- November 06, 2012

Fitch Ratings has assigned a rating of 'BBB-' to General Motors Holdings LLC's
(GM Holdings) new secured revolving credit facilities. GM Holdings is a
wholly-owned subsidiary of General Motors Company (GM). The Issuer Default
Rating (IDR) for both GM and GM Holdings is 'BB+' and the Rating Outlook for
both is 'Stable'.

The new secured revolving credit facilities have replaced GM Holdings'
existing $5 billion secured revolver that matures in 2015. The new facilities
total $11 billion and comprise two revolvers: a $5.5 billion three-year
facility and a $5.5 billion five-year facility. Unlike the current credit
facility, under which GM Holdings is the sole borrower, General Motors
Financial Company, Inc. (GMF) and certain foreign subsidiaries are
co-borrowers on the three-year facility. Most of the terms and conditions of
the facilities are similar to the existing revolver, including a liquidity
covenant that requires GM to maintain consolidated cash and credit facility
availability of $4 billion, including cash and credit facility availability of
$2 billion at GM's domestic subsidiaries.

The new credit facilities are secured by collateral consisting of nearly all
of the domestic tangible and intangible assets of GM and the facilities'
subsidiary guarantors. In addition, 100% of the capital stock of the
first-tier domestic subsidiaries of GM and the subsidiary guarantors and 65%
of the capital stock of first-tier foreign subsidiaries of GM and the
subsidiary guarantors is also pledged as collateral for the facilities. The
facilities contain a borrowing base covenant that could limit their
availability if the value of the borrowing base falls below $11 billion. A
collateral release provision calls for the lenders to release the collateral
upon the company's request if GM's IDR (or its equivalent) is rated 'BBB-' (or
its equivalent) or higher from at least two of the three largest U.S. rating
agencies, including Fitch.

The new credit facilities improve GM's financial flexibility by increasing the
company's available liquidity by $6 billion, while the five-year facility
ensures that the company will have at least $5.5 billion of revolver
availability for two years beyond the expiration of the current revolver.
Also, by adding GMF as a co-borrower on the three-year facility, GM has
provided its captive finance subsidiary with additional liquidity that could
be utilized if GMF is the successful bidder for some of Ally Financial, Inc.'s
(Ally) non-U.S. operations. Although GM has not borrowed from the existing
facility since it was established in October 2010, Fitch believes the company
may seek to borrow on the new facilities from time to time, particularly if
GMF is the successful bidder for the Ally operations.

Fitch's rating of 'BBB-' on the new credit facilities is one notch above GM
Holdings' IDR of 'BB+', reflecting the substantial collateral coverage
securing them. According to Fitch's notching criteria, 'BBB-' is the highest
security rating possible for an issuer with an IDR of 'BB+'.

GM's ratings reflect the automaker's positive free cash flow generating
capability, very low leverage, strong liquidity position, reduced (but still
heavy) pension obligations and improved product portfolio. The company
continues to keep a relatively low level of automotive debt on its balance
sheet, while maintaining a strong liquidity position, which would provide it
with substantial financial flexibility in the event of another severe auto
industry downturn. GM is also the most globally diverse of the Detroit Three,
with a strong presence in China and other emerging markets, which would
further help to shield the company from a regionally focused downturn.

Despite its strengthened financial position, GM continues to face a number of
headwinds. Profitability continues to lag the company's strongest competitors
as it works to improve the efficiency of its manufacturing and product
development processes. European losses, in particular, are likely to weigh on
GM's results for several more years. At the same time, the underfunded status
of GM's pension plans will remain high, even after defeasing U.S. salaried
retiree obligations.

The Stable Outlook on GM, GM Holdings and GMF reflects Fitch's expectation
that the ratings are not likely to be upgraded in the near term. However,
Fitch could consider a positive rating action over the longer term if GM's
margins, particularly in North America, rise to the level of its strongest
competitors and if the financial performance of its European operations
stabilizes. Also factored into any positive rating action would be a
demonstrated ability to at least maintain both market share and net pricing in
the company's key global markets. Continued progress on reducing pension
liabilities will also be a key driver of any positive rating action. Fitch
will look for GM to maintain a sustained automotive liquidity position of
around $25 billion, including both cash and revolver availability over the
intermediate term.

Fitch could consider a negative rating action if a very severe downturn
significantly weakens GM's liquidity position. However, Fitch has incorporated
into the current ratings the effect that a downturn would likely have on the
company's credit profile, and GM appears to be generally well positioned to
withstand the pressures of a steep decline in demand. Fitch could also
consider a negative rating action if management deviates from its plan to
maintain a strong balance sheet, either by increasing automotive debt or
allowing automotive liquidity to fall below $25 billion for an extended period
of time. Problems with operational execution or a significant decline in
market share could also lead to a negative action.

GM's automotive free cash flow (including preferred dividends) will be
pressured in 2012 as a result of an estimated $2.6 billion in cash needed to
fully fund and transfer the U.S. salaried pension plan to a group annuity
plan. Excluding these cash costs, however, Fitch expects adjusted free cash
flow in 2012 to be significantly higher than the 2011 level, even with a
roughly $2 billion increase in projected capital spending. Over the
intermediate term, Fitch expects capital spending to run at a higher rate than
recent historical levels as the company accelerates investments in new
products and operational efficiency. In general, though, Fitch expects
strengthening market conditions in North America to support free cash flow
over the next several years and more than offset cash burn in Europe tied to
restructuring costs and the region's weak automotive market.

As noted above, in August, GMF announced that it had entered a bid for a
portion of the international assets that Ally plans to divest. A number of
other parties have also entered bids for these assets, and it is too soon to
know if GMF will be successful in acquiring any of them. The amount of GMF's
bid has not been disclosed. Fitch believes GMF is a logical bidder for these
assets as 97% of Ally's international new vehicle dealer inventory financing
and 82% of Ally's international new vehicle auto financing was for GM dealers
and customers as of year-end 2011. Fitch notes that if it is successful in
acquiring the assets, the size of GMF's balance sheet could more than double.

GMF's ratings are linked to GM, given the finance subsidiary's strategic
importance to the parent and Fitch's assessment of implicit and explicit
support that is currently provided and/or would be expected to be provided by
the parent in times of financial distress. However, because a large portion of
GMF's originations are related to non-GM dealers, Fitch believes GMF does not
currently meet the definition of a 'core' subsidiary as outlined in Fitch's
criteria report titled "Rating FI Subsidiaries and Holding Companies" (Aug.
10. 2012). As a result, GMF's IDR is one notch below that of its parent, GM.
GMF's ratings also reflect its established market position in the auto finance
sector, seasoned management team, strong asset quality, improved operating
performance, enhanced liquidity profile, demonstrated funding flexibility and
favorable leverage relative to other rated captive finance companies.

Fitch maintains the following ratings on GM and its subsidiaries:

GM

--Long-term IDR at 'BB+';

--Preferred stock rating at 'BB-';

--Rating Outlook Stable.

GM Holdings

--Long-term IDR at 'BB+';

--Secured revolving credit facilities at 'BBB-';

--Rating Outlook Stable.

GMF

--Long-term IDR at 'BB';

--Senior unsecured debt at 'BB';

--Rating Outlook Stable.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable criteria and related research:

--Corporate Rating Methodology (Aug. 8, 2012);

--Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers
(Aug. 14, 2012);

--Evaluating Corporate Governance (Dec. 13, 2011);

--Global Financial Institutions Rating Criteria (Aug. 15. 2012);

--Finance and Leasing Companies Criteria (Dec. 12. 2011);

--Rating FI Subsidiaries and Holding Companies (Aug. 08. 2012);

--Captive Finance Companies - A Comparative Analysis (May 08. 2012).

Applicable Criteria and Related Research:

Captive Finance Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677864

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659834

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Evaluating Corporate Governance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657143

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Contact:

Fitch Ratings
Primary Analyst
Stephen Brown (GM and GM Holdings)
Senior Director
+1-312-368-3139
Fitch Inc., 70 West Madison Street, Chicago, IL 60602
or
Secondary Analyst
Craig D. Fraser
Managing Director
+1-212-908-0310
or
Primary Analyst (GMF)
Katherine Hughes
Associate Director
+1-312-368-3123
Fitch Inc., 70 West Madison Street, Chicago, IL 60602
or
Secondary Analyst (GMF)
Mohak Rao, CFA
Director
+1-212-908-0559
or
Committee Chairperson (GM and GM Holdings)
Mark Oline
Managing Director
+1-312-368-2073
or
Committee Chairperson (GMF)
Meghan Neenan, CFA
Senior Director
+1-212-908-9121
or
Media Relations
Brian Bertsch
+1-212-908-0549
brian.bertsch@fitchratings.com