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GM Lifted to Investment Grade Ahead of Buyback

Sept. 23, 2013
Moody's said the company’s credit metrics will improve based on new product introductions in the US, solid position in China and focus on maintaining a robust liquidity profile.

NEW YORK CITY -- As the biggest U.S. automaker said it would buy back $3.2 billion in shares owned by the UAW union's trust, Moody's upgraded General Motors  (IW 500/5) debt to investment quality Monday.

GM said it had reached an agreement to repurchase 120 million shares of preferred stock from the UAW Retiree Medical Benefits Trust (UAW VEBA) at $27 per share.

To help fund the buyback, GM said it was issuing five-, ten- and 30-year senior unsecured notes. The buyback agreement depends upon the closing of the offering by September 30.

In reaction, Moody's upgraded the company's debt to investment grade, from Ba1 to Baa3, with a stable outlook.

The upgrade "reflects our expectation that GM's competitive position and credit metrics will continue to improve based on the strength of the company's new product introductions in a healthy US market, its solid position in the increasingly important Chinese auto market, and its focus on maintaining a robust liquidity profile," Moody's said in a statement.

"Good things happen when you build great cars and trucks and deliver strong financial results," said Dan Akerson, GM chief executive. "Today's news from Moody's further underscores that this is exactly what we are doing today."

UAW VEBA currently holds 260 million shares of Series A Preferred Stock, while Canada Holdings owns an additional 16 million shares.

GM said it expected to take a third-quarter charge of about $800 million for the share buyback.

US and Canadian authorities rescued GM in the 2009 as the automaker plunged into insolvency during the financial crisis. Last Thursday, the US Treasury Department announced it planned to fully exit its investment in GM within the next 12-15 months, depending on market conditions. Treasury currently holds 500.1 million shares of GM common stock.

Earlier in September, the Canadian government and Ontario province announced they had sold off a large part of their share in GM.

Copyright Agence France-Presse, 2013

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