Please ensure Javascript is enabled for purposes of website accessibility

GM Adjusts Plans for Refinancing $16.5 Billion in Revolving Loans, Report Says

By Howard Smith – Apr 6, 2020 at 12:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Volatile markets during the fight against the pandemic impact financing conditions.

General Motors (GM -2.92%) is changing previous plans for refinancing its credit facility as the COVID-19 pandemic affects markets, according to a Reuters report. The company originally discussed extending maturities on its $16.5 billion credit facilities with banks in early March, according to the report. But instability caused by the pandemic has impacted liquidity concerns for both the company, and for banks. 

On March 24, 2020, GM announced it would draw down approximately $16 billion from its revolving credit lines to supplement its cash position and maintain flexibility in the midst of uncertainty caused by the pandemic. This complicated the talks the company was already having with banks concerning extending maturities, according to the Reuters report. 

Banker counting out cash to loan

Image source: Getty Images.

Higher cost of money

The refinancing discussions consisted of three parts, according to the report -- $2 billion and $4 billion loans with one and three-year maturities, respectively, and a $10.5 billion five-year facility. With the added complications, however, only the shorter maturity loans are now being refinanced, and at higher cost to the company. 

Banks are concerned about the financing in this environment. Reuters reported a bank source last week, saying "The loan market wants to go shorter because banks are very uncomfortable with their own cost of liquidity." 

While the report says that GM will now leave the $10.5 billion facility in place at its current rates, the costs on the $6.5 billion of one and three-year facilities will both increase. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$33.62 (-2.92%) $-1.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.