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GM Secures $5 Billion Credit Facility

August 12, 2010
2 min to read


DETROIT - General Motors Co. has secured a $5 billion credit facility in a step that clears the way for a return to the public markets later this year, two people familiar with the deal told The Wall Street Journal.


Banks including Bank of America, Morgan Stanley and J.P. Morgan committed up to $500 million a piece to the credit line, these people said.

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A revolving credit facility, which allows a company to borrow for any reason, would bolster GM's balance sheet and provide a financial cushion should the company's recovery plans hit a snag.


With the backup funding in place, GM is prepared to file registration papers for an initial public offering as soon as Friday, the people familiar with the matter said.


Ten banks are contributing to the credit facility, but there is a chance more could sign on as demand for the loan was high, a person familiar with the deal said. The facility would likely remain at $5 billion, but the individual amounts could drop, this person said.


Reuters first reported that GM finalized a deal on a credit facility.


The offering is expected later this year and will allow the U.S. government to begin selling its $50 billion stake in the auto maker.

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The U.S. Treasury is expected to opt for a sale of at least $10 billion of its shares in the company, but the initial amount remains in question, a person familiar with the situation said.


GM Chairman Edward E. Whitacre is pushing for Treasury to offload as large a stake in the company as possible in an effort to shed the stigma of being owned by the U.S. government. Mr. Whitacre last week told reporters he wanted the government out of the business entirely and is frustrated with the "Government Motors" label critics have placed on GM.


Treasury is taking a more conservative approach to the size of the first sale of shares, looking to avoid diluting the value by putting out too many at once, according to people familiar with the situation.


On Thursday, GM is expected to report a second quarter profit in excess of $1 billon, the company's strongest performance since at least the second quarter of 2004.


The strong results will be part of GM's campaign to convince investors it's a good bet after a bankruptcy that wiped out billions in debt, obligations and excess workers, brands and factories.

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For GM, a second consecutive quarterly profit by would mark a turning point for GM, which essentially stopped making money from 2005 through 2009 and has been living off the auto bailout since then.

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