Moody's Upgrades Majority of GM Debt to Investment-Grade

Moody's Upgrades Majority of GM Debt to Investment-Grade

Citing expectations that General Motors will demonstrate continued financial improvement due to the growing U.S. auto market and improving credit metrics, Moody's has upgraded GM's Corporate Family Rating, which includes its multiple subsidiaries, to Baa3 from Ba1, Moody's announced today.

The upgrade in rating to investment-grade -- Baa is Moody's lowest investment-level credit assessment -- impacts approximately $15 billion of GM's obligations, according to Moody's. However, the three new tranches of senior unsecured notes GM intends to offer, as noted in its SEC filing today, have received a Ba1 rating, equal to one tier below investment grade, Moody's said.

GM's credit ratings have been in junk territory since 2005, when the company was struggling with huge debts, falling U.S. market share and factories cranking out more cars than people were buying. GM closed plants and erased much of its debt with a 2009 bankruptcy. It has made an annual profit every year since 2010.

The upgrade likely means GM will get lower interest rates when it borrows money in the future.

Another factor working in GM's favor, according to Moody's, is its relatively strong liquidity position. With about $31 billion at its disposal as of the end of Q2 2013, which includes approximately $24 billion in cash and $7 billion remaining in its credit facility, Moody's expectation is that GM will be able to maintain those levels of ready cash given the "considerable cyclicality of the global automotive sector."

Commenting on the decision to upgrade GM's debt, senior vice president of Moody's Bruce Clark explained in Moody's statement that "GM has been on a steadily improving operational and financial trajectory since it emerged from bankruptcy. We think that the disciplines the company has embraced, combined with the strength of its US product portfolio and a healthy domestic market, will enable it to stay on that path."

Two other ratings agencies, Fitch and Standard & Poor's, still have GM at junk status. In August, Fitch raised GM's outlook to positive from stable and said it could upgrade GM within two years. Standard and Poor's also raised GM's outlook to positive earlier this month.

-- Material from The Associated Press was used in this report.


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