NEW YORK - General Motors Co will pay a spread of 400 basis points over the London Interbank Offered Rate, or LIBOR, if it draws on its $5 billion revolving credit facility in the first three months, banking sources told Thomson Reuters LPC on Friday.
The drawn spread switches to a ratings-based pricing grid thereafter. If the credit facility is undrawn, which it is expected to be, GM will pay 75 basis points for the first three months. The undrawn spread will also be based on ratings after the first three months.
As previously reported by TRLPC, GM has lined up commitments from 10 banks on its $5 billion revolving credit facility.
The 10 banks include leads JPMorgan and Morgan Stanley, U.S. banks Bank of America Merrill Lynch, Citi and Goldman Sachs, and foreign banks Barclays, Credit Suisse, Deutsche Bank, UBS and RBC.
The banks initially committed $500 million each, although some of the foreign banks are said to have been scaled back to commitments of $400 million each, possibly because of potential broader syndication of the loan in the future.
GM filed for an initial public offering of up to $100 million on August 18. That does not represent the full amount that GM hopes to raise, people familiar with the situation told Reuters. GM could raise up to $20 billion in its IPO, the people said.
GM said in its prospectus that secured indebtedness entered into after July 10, 2009 is limited to $6 billion, provided that commitments under any secured revolving credit facilities do not exceed $4 billion. Secured indebtedness exceeding these amounts is subject to an incurrence test under which total debt divided by 12 month trailing EBITDA cannot exceed 3:1 and also triggers repayments of 50 percent of the amount borrowed.
GM said in the prospectus that while it does not believe it would require proceeds from the credit facility to fund operating activities, the arrangement would provide additional liquidity and financing flexibility.
There is no assurance that we will reach a final agreement on this facility. If we successfully execute a credit facility, we expect to prepay the VEBA notes with available cash, GM said. At June 30, 2010, GM reclassified the VEBA notes, which are notes owed to former GM retirees for healthcare benefits, from long-term debt to short-term debt in an amount of $2.9 billion (including unamortized premium of $209 million).
(Reporting by Smita Madhur; Editing by Steve Orlofsky)