General Motors tapped the market last week for a $1.5 billion term loan backed by a collateral package that helped it wiz through the market. JPMorgan and Credit Suisse launched syndication last Monday with a close date set for Friday, but it was already two times oversubscribed by Wednesday, according to market sources. The company is looking to add to its liquidity cushion with the new credit. Pricing on the term loan is LIBOR plus 2 3/4%, according to a GM spokeswoman.
One buysider said his firm is taking a close look at the deal. "It has a pretty solid collateral package. It is secured by machinery, equipment and plants. People are comfortable with the collateral," he said. The term loan will be secured by all of the company's U.S. property, plants and equipment, according to the spokeswoman.
However, another investor thought the deal might largely be driven by alternative investors. "It's not very CLO friendly I think it's being driven by hedge fund interest."
GM's '33 bonds were up two points to 91 3/4 after syndication launched. Its five-year credit default swaps tightened 25-30 basis points to 390-400. A trader said the new secured debt is positive for the bonds because it adds to the company's liquidity. "It shores up their balance sheet," said the trader.
Moody's Investors Service rated the proposed term loan Ba3 citing the company's existing sizable liquidity but daunting operational and competitive challenges. Standard & Poor's rated the term loan B+ with a 1 recovery rating.