GM to sell long-term notes to make pension payment
Feb. 18, 2016
DETROIT (AP) — General Motors plans to sell 20- and 30-year notes to make a payment on its huge U.S. pension obligation for hourly workers.
The Detroit company filed a prospectus for the offering with the U.S. Securities and Exchange Commission on Thursday that did not specify an amount. But Moody's Investor Services said it would be $2 billion in senior unsecured credit.
At the end of last year GM's U.S. hourly pension plan was underfunded by $10.4 billion. About $61 billion of the obligations were funded for the plan's roughly 360,000 pensioners.
GM says in a statement that any proceeds left over from the discretionary payment will go for general corporate purposes.
Moody's rated the debt, which comes due in 2036 and 2046, at Ba1, the same rating it has on an existing $7 billion worth of senior unsecured notes. Ba1 is the highest rating for speculative-grade corporate debt that carries "substantial credit risk."
But Moody's said in a statement that it expects GM will strengthen its performance in North America and Europe and will keep a strong position in China.
GM posted a record $9.7 billion in net income last year.
Shares of General Motors Co. slipped 14 cents to $29.13 in morning trading Thursday.