What happened
Shares of General Motors (GM +2.56%) were rising on Friday, after the company said that its $4 billion bond offering had been priced with moderate yields and that it will soon have a new $2 billion credit line available.
As of 12:45 p.m. EDT, GM's shares were up about 6.2% from Thursday's closing price.
So what
GM said that its offer of three series of unsecured bonds, which will raise $4 billion in total, was priced as follows on Thursday:
- The first series, totaling $1 billion, will yield 5.4% and mature in 2023.
- The second, totaling $2 billion, will yield 6.125% and mature in 2025.
- The third, totaling $1 billion, will yield 6.80% and mature in 2027.
The yields on GM's new bonds are significantly below the yields on bonds issued by Ford Motor Company (F +6.71%) in April, which ranged from 8.5% on bonds maturing in 2023 to 9.625% on bonds maturing in 2030.
GM will begin reopening its U.S. factories on May 18, the automaker confirmed this week. Image source: General Motors.
The difference in yields (which are set as part of pricing the offering) reflects credit quality: Ford lost its investment-grade credit rating on March 26 after idling its U.S. plants and drawing down its lines of credit; GM, which made similar moves, has so far avoided a similar downgrade.
GM and Ford, like other automakers, have been burning cash at high rates since closing most of their factories in mid-March.
Now what
GM also told auto investors that it expects to enter into a new revolving-credit agreement after the bond offerings close. That new credit line, which will also be unsecured, will add about $2 billion to the total funds that GM has available to borrow.
As of March 31, GM had $32.1 billion in cash on hand and additional available credit lines totaling $1.4 billion.
