GM Seeks Billions in Credit for Life After Uncle Sam
General Motors Co. is in talks with major banks to set up a $5 billion line of credit as it works to convince potential investors it can function without government support, people familiar with the situation told The Wall Street Journal.
The bank talks come as GM nears an initial public offering of shares, which could come in the fourth quarter. The carmaker is on an all-out campaign to pitch itself as a reinvented company capable of delivering sustainable profits.
A revolving credit facility, which allows a company to borrow for any reason, would bolster GM's balance sheet and provide a financial cushion should the company's recovery plans hit a snag. A stock sale would allow the U.S. government, GM's biggest shareholder, to begin reducing its about 61% stake in the Detroit auto maker.
Finance chief Chris Liddell this week told a gathering of potential investors and auto analysts that the company aims to eliminate all debt and achieve an investment-grade credit rating. He didn't provide a time frame. He said GM has about $42.2 billion in outstanding debt and pension liabilities.
The goal of holding little or no debt is an unfamiliar one for GM or for any of the Detroit auto makers, which historically have carried hefty debt loads. Ford, for instance, is expected to report it had $27 billion in debt at the end of June. It also has about $12 billion in unfunded pension obligations.
GM is in talks with several major banks on the revolving credit, including Morgan Stanley and JPMorgan Chase & Co., both of which have been tapped for lead roles in the auto maker's stock sale.
GM was burning more than $1 billion in cash a month before filing for bankruptcy in June 2009. In this year's first quarter, GM produced a $1.2 billion operating profit and generated $1 billion in free cash flow.
After nearly running out of cash last year, GM ended the first quarter with $35.7 billion in cash and marketable securities, much of it supplied by the U.S. and Canadian governments in exchange for equity in the company.
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