General Motors (NYSE:GM) 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.
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.