GM Buys Back Treasury Shares

Last year, American manufacturer GM became one of the preferred beneficiaries of the government's bailout money ($52 billion were poured into what appeared to be a bottomless pit). The carmaker repaid this year its debt in full, not without a few eyebrows being raised here and there by the speed with which it came back afloat.

Now, GM is investing, and it does so with quite an appetite. This doesn't mean though that GM doesn't owe some more money. In an effort to reduce the debt, the carmaker announced today it will slash leverage by $11 billion by reducing debt and improving its pension funding position.

The most exciting news however, in light of the initial public offering, is the fact that the carmaker will be buying back $2.1 billion worth of US Treasury shares (the government got 61 percent of the car manufacturer during the bankruptcy process).

GM also plans to repay the $2.8 billion outstanding on the 9 percent secured note provided to the UAW Retiree Medical Benefits Trust and secured a $5 billion, five-year revolving credit line with several banks.

“Completion of these actions will enable us to reduce net interest cost and preferred dividends by $0.5 billion per year,” said Dan Ammann, GM vice president of finance and treasurer.

“As importantly, we will have approximately $24 billion of total liquidity as of June 30, 2010 pro forma for these actions, our AmeriCredit acquisition, and excluding any public offering proceeds.”

The measures meant to improve the financial situation will not end here. The carmaker will also increase its accounts receivable balance by terminating a wholesale advance agreement with an unnamed financial institution.