Summary
General Motors Company (GM) announced on May 26, 2016, that it has amended and restated its existing revolving credit facilities, significantly increasing its aggregate borrowing capacity to $14.5 billion. This enhancement includes a new three-year facility for $4.0 billion and a five-year facility for $10.5 billion, both unsecured and designed to bolster the company's liquidity. This strategic move demonstrates GM's proactive approach to financial management and its commitment to maintaining robust financial flexibility.
Key Highlights
- 1GM increased its aggregate revolving credit facility borrowing capacity to $14.5 billion, up from $12.5 billion previously.
- 2The new facilities consist of a $4.0 billion three-year revolving credit facility and a $10.5 billion five-year revolving credit facility.
- 3Both facilities are unsecured, providing additional liquidity without requiring collateral.
- 4The facilities are available to GM and certain wholly-owned subsidiaries, including its captive finance company, GM Financial.
- 5The company has the option to increase the aggregate borrowing capacity up to $18 billion, subject to certain conditions.
- 6Covenants include maintaining minimum global and U.S. liquidity levels ($4.0 billion and $2.0 billion, respectively) and restrictions on mergers, asset sales, and secured debt.
- 7The interest rates are variable, based on Eurodollar or alternative base rates, and subject to an applicable margin tied to the company's credit rating.
Frequently Asked Questions
The primary purpose of amending and restating the credit facilities is to increase General Motors' aggregate borrowing capacity to $14.5 billion, enhancing its overall liquidity and financial flexibility. This provides the company with greater resources to manage its operations and strategic initiatives.
The $4.0 billion facility has a three-year term, while the $10.5 billion facility has a five-year term. Both are revolving credit facilities, meaning GM can borrow, repay, and re-borrow funds up to the specified limits during their respective terms. The five-year facility offers a longer maturity, providing extended financial planning certainty.
No, both the three-year and five-year revolving credit facilities are unsecured. This means GM is not required to pledge specific assets as collateral to secure these loans, which is generally favorable for the company.
The facilities contain typical covenants such as restrictions on mergers, asset sales, and secured debt borrowings. Critically, GM must maintain at least $4.0 billion in global liquidity and $2.0 billion in U.S. liquidity. Failure to maintain an investment-grade rating from at least two major credit agencies may require additional guarantees from domestic subsidiaries.