GM’s Seeks Investment-Grade Rates for Larger Revolver

General Motors Co. (GM), which has junk credit ratings, aims to double its revolving credit line to $10 billion at the same interest rates as if it were an investment- grade company, Chief Executive Officer Dan Akerson said.

“We think we can get it priced as if we’re investment grade, which is kind of one of our goals going into 2013, to achieve investment grade,” Akerson said yesterday in an interview in advance of the Sao Paulo show, which begins with press conferences today.

Securing access to lending at investment-grade interest rates would signal that the lending markets see GM’s turnaround plan as a success. GM, which went through government-backed bankruptcy reorganization in 2009, earned an annual record of $9.19 billion profit last year and reclaimed its title of world’s top-selling automaker from Toyota Motor Corp. (7203)

Doubling the credit line would give GM capacity similar to Ford Motor Co. (F), which has $9.3 billion in revolving credit facilities.

“We look at other companies our size, not only in the industry -- Ford -- but outside the industry. And with the amount of global operations, I think it’s a good insurance to have,” Akerson said. It would not be for funding pension liabilities, he said.

GM has “substantial cash requirements going forward,” including pension obligations and reinvesting in operations, according to an Aug. 3 GM regulatory filing.

Akerson declined to say when GM may close on its new credit line. “We’ve had good meetings with the banks,” he said.

Lowest Rates

Borrowing costs for high-yield, high-risk companies are at the lowest level in decades. Yields declined to 6.84 percent as of Oct. 18, down from this year’s high of 8.465 percent on Jan. 3 and the lowest since at least 1990, according to the Bank of America Merrill Lynch U.S. High Yield Master II index. GM is rated Ba1 by Moody’s Investors Service and BB+ at Standard & Poor’s, the highest speculative grade for each.

GM had $32.6 billion in automotive cash and marketable securities on hand on June 30. It also has a $5 billion revolving credit line that was set up in October 2010.

“Old rule of thumb for a CFO: Get liquidity when you don’t need it,” Matthew Stover, an analyst with Guggenheim Securities LLC in Boston, said in an e-mail in August. “GM’s revolver is a bit small for a company its size, money is cheap and who knows what the rest of the year holds,” such as a possible deepening financial crisis in Europe.

GM rose 0.1 percent to $24.62 at the close in New York.

To contact the reporter on this story: Tim Higgins in Sao Paulo at thiggins21@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.