GM Ramps Up Coffers With $4 Billion Debt Sale, Plans New $2 Billion Credit Line


General Motors Co. (GM) raised $4 billion from the sale of three senior notes, while announcing plans for a new $2 billion credit line, as the U.S. automaker struggles with the shutdown of production plants amid the coronavirus pandemic.

Shares in GM surged 6.6% $23.93 in U.S. trading on Friday, trimming its year-to-date decline to 36%.

The $4 billion bond sale includes $1 billion of 5.40% notes due in 2023, $2 billion of 6.125% notes maturing in 2025 and $1 billion of 6.80% notes due in 2027. The offering is expected to settle on May 12. Net proceeds are expected to be used for general corporate purposes, the company said in a statement.

Following the closure of the offering, GM plans to enter into a new 364-Day Revolving Credit Agreement, subject to certain closing conditions.

“We expect the New 364-Day Revolving Facility to be unsecured and to provide available borrowing capacity of approximately 2 billion in U.S. dollars, and we have received commitments from lenders in excess of this amount,” GM said.

Car production came to a halt in March because of the fast spread of the coronavirus outbreak, which in turn is putting pressure on companies’ sales and cash flow. GM has implemented cost-cutting steps in response to the COVID-19 outbreak, including withdrawing its dividend and share buybacks, reducing marketing budgets, and lowering some workers’ salaries. The U.S. automaker plans to reopen most of its North American plants on May 18.

Last week, Fitch Ratings cut GM’s rating to BBB-, or one notch above junk status, from BBB previously, as it expects “the macro environment to remain weak through the rest of 2020 and much of 2021, which will likely keep sales volumes well below the 2019 level into much of 2022.”

On Friday, Morgan Stanley analyst Adam Jonas raised GM’s price target to $40 from $37, while maintaining a Buy rating.

Overall, Wall Street analysts are cautiously optimistic about GM’s stock. The Moderate Buy consensus rating boasts 8 Buys, 1 Hold and 1 Sell. The $31.44 average price target previews 31% upside potential in the shares in the coming year. (See GM stock analysis on TipRanks)

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