General Motors Receives Same Credit Rating Before IPO From Fitch as Ford
General Motors Co. was given the same credit rating as Ford Motor Co. from Fitch Ratings, which said the largest U.S. automaker has improved its balance sheet as it plans an initial public offering to pare government stakes, Bloomberg reported.
GM was given an initial BB- issuer default rating, the same as Dearborn, Michigan-based Ford, Fitch said in a statement today. The rating for Detroit-based GM, 61 percent owned by the U.S. government, reflects its “strong liquidity position, low leverage, improved cost structure and increasingly competitive product portfolio,” wrote Stephen Brown, a Fitch analyst.
“Although they have similar ratings, you sort of get to them from different paths,” Brown, who is based in Chicago, told Bloomberg in a telephone interview. “GM doesn’t have a whole lot of debt, but they have very large pension obligations. Ford’s pension obligations are significant, but they’re lower than GM’s by quite a bit. But Ford has a lot of debt.”
GM emerged from bankruptcy in July 2009 having received $50 billion in federal aid. GM and the U.S. Treasury aim to hold an $8 billion to $10 billion IPO in November, two people familiar with the plans said last month.
The company’s pension plans were underfunded by $27 billion through 2009, Fitch said. Ford’s pensions were underfunded by about $6.1 billion through last year, down from $16 billion in 2008, Fitch said in an Aug. 6 report. Fitch raised its rating on Ford in that report two steps to BB-, three levels below investment grade.
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