GM to pay down pension debt with senior unsecured notes

Michael Martinez
The Detroit News

General Motors Co. will attempt to pay down its $10.4 billion in unfunded pension debt for U.S. hourly workers by offering 20- and 30-year senior unsecured notes, the automaker said Thursday.

The notes include $1.25 billion of 6.60 percent notes due in 2036 and $750,000 million of 6.75 percent notes due in 2046, GM said. The transactions would close and GM would receive the net proceeds Feb. 23.

GM said it hopes to raise about $2 billion in capital by selling the notes to help pay down the debt. In the event GM does not use all of the net proceeds for this contribution, it said it would use the money for “general corporate uses.”

The automaker’s U.S. pension obligation decreased approximately $5 billion to $71 billion in 2015 and is 85 percent funded, the company said in its 2015 earnings report last month.

“We intend for the U.S. hourly plan to be fully funded over time,” GM spokesman Tom Henderson said.

Moody’s Investor Services on Thursday assigned a “Ba1” rating to the offering, giving it a positive outlook.

“GM’s long-term ratings and positive outlook reflect Moody’s expectation that the company will continue to strengthen its performance in North America and Europe, and that it will maintain a strong position in China,” it said in a note. “In addition, we expect that the company will continue to make progress in building an operating structure that can contend with the risk inherent in the global automotive sector.”

GM last year made a $9.7 billion net income.

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