General Motors Co. said it will issue $2 billion in new debt to help shore up its pension plan for U.S. hourly workers.
The senior unsecured debt includes $1.25 billion of 6.6 percent notes due in 2036 and $750 million of 6.75 percent notes due in 2046, GM said in a statement Thursday. Goldman Sachs, Citigroup and Bank of America’s Merrill Lynch are managing the offering, the automaker said.
Standard & Poor’s and Fitch Ratings earlier in the day said they would rate the notes BBB-, their lowest investment grades. Moody’s put the debt at Ba1, one step below investment grade.
GM said it its annual regulatory filing earlier this month that it expected to make a $2 billion discretionary contribution, funded by debt, to the U.S. hourly plan by the middle of this year. The automaker, which also has a plan for its U.S. salaried employees, said in the annual report that its U.S. pension obligations at the end of 2015 totaled $71.5 billion and were underfunded by $10.4 billion. GM’s global pension obligations were about $95 billion, with a shortfall of $21 billion.
The money raised through the debt offering will help GM boost the total value of assets in the hourly fund. The Detroit-based company expected to achieve a return of 6.4 percent on its pension plan assets and achieved about 1 percent last year and 12 percent in 2014, said spokesman Tom Henderson. The Dow Jones Industrial Average was down 2.2 percent last year, according to Bloomberg data.