General Motors Co.’s South Korean unit said it redeemed about 700 billion won ($649 million) of preferred shares to avoid higher dividend payments.
GM Korea bought back the securities from creditors including Korea Development Bank late last year after the dividend payout escalated to 7 percent of the preferred stock’s $4,000 price from 2.5 percent, according to a company e-mail today. The increase in the dividend is part of a deal in 2002, when the GM unit agreed to redeem all the preferred shares from creditors by 2017.
The latest purchase indicates the company redeemed half of the 325,414 preferred shares it had outstanding at the end of 2011, though GM Korea declined to say how many preferred shares it bought back.
“The transaction was purely based on a decision to improve the financial status of the company,” the company said in an e-mailed response to a Bloomberg query. “GM Korea will continue to buy back preferred shares according to the contract.”
GM’s factories in South Korea produce Chevrolet vehicles for the domestic market and for export to markets including Europe and South America.