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

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

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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.

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