GM buys back 2.1 billion dollars in US preferred stock

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GM buys back 2.1 billion dollars in US preferred stock

Source: Xinhua
[09:24 October 29 2010]
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General Motors Co. is buying back all of the US Treasury Department's preferred stock worth 2.1 billion dollars, and has obtained a 5-billion-dollar line of credit from a group of banks, the automaker announced on its website on Thursday.

GM said it is taking a number of steps to reduce its debt by 11 billion dollars, including making a contribution of at least 6 billion dollars in cash and stock to its underfunded employee pension plans. It also will make a 2.8-billion-dollar payment to a United Auto Workers retiree healthcare trust fund.

The move to buy back the preferred stock held by the Treasury is another step by the Detroit-based automaker toward repaying the 49.5-billion-dollar government bailout.

GM already had repaid 6.7 billion dollars in government loans, and just over 700 million dollars in dividends and interest.

The Treasury said GM will repurchase its 83.9 million shares at 25.50 dollars each, which means the Treasury will collect 2.14 billion dollars, or 40 million dollars more than their previous value. As a result, GM will have repaid 9.5 billion dollars of its 49.5-billion-dollar bailout, leaving about 40 billion dollars unpaid.

"Completion of these actions will enable us to reduce net interest cost and preferred dividends by 0.5 billion dollars per year," said Dan Ammann, GM vice president of finance and treasurer. "As importantly, we will have approximately 24 billion dollars of total liquidity as of June 30, 2010 pro forma for these actions, our AmeriCredit acquisition, and excluding any public offering proceeds."

GM was paying 9-percent dividends on the government's 2.1 billion dollars in preferred stock.

The US Treasury swapped 42.8 billion dollars in loans for a 61-percent equity share in GM, and the 2.1 billion dollars in preferred stock. The government said earlier it would not sell the preferred shares as part of the initial public stock offering, which is expected next month.