General Motors Corp.'s term loan "B" broke in the secondary market at 100 3/8-5/8. It dipped slightly to 100 1/4-1/2 with certain dealers trading a couple of hundred million dollars of paper. JPMorgan and Citigroup lead the deal, which is priced at LIBOR plus 2 3/8%.
Dealers said trading was very active in the loan, which is popular with investors. "It is a great deal," said one buyside trader. "It has great collateral coverage. There is so much debt that is junior to the bank debt. Even if it went into bankruptcy, this would trade well," he said. The term loan is secured by a first priority security interest in all of GM's U.S. machinery and equipment. Moody's Investors Service assigned a Ba3 and a 1 loss given default assessment. The rating reflects the good asset protection and recoveries relative to the unsecured debt.
GM has about $20 billion in cash. It recently closed a $4.5 billion revolving credit facility. The term loan gives it an additional $1.5 billion of liquidity. A Moody's report noted that the $10 billion it expects to receive from the sale of General Motors Acceptance Corp., which GM completed this week, will be a large boost to its liquidity. A spokesman did not return calls.