GM Plans to Pay Back $6.7B Loan

DETROIT (TheStreet) -- General Motors plans to begin paying back a $6.7 billion loan it owes the U.S. government starting late this year and could repay the entire loan by the middle of 2011, according to published reports.

The government debt represents about 13% of the $52 billion that U.S. taxpayers have invested in General Motors, the majority of which was exchanged for a 61% ownership stake in the company, the Associated Press reports.

The U.S. automaker is expected to announce the repayment play Monday when it releases its preliminary third-quarter earnings, AP and the Wall Street Journal report.

Under the plan to pay back the $6.7 billion, GM will make quarterly payments of $1 billion to the U.S. government and $200 million to the Canadian government beginning in late 2009. GM would be on track to pay off the $6.7 billion U.S. debt and a $1.4 billion debt to Canada by the middle of 2011, ahead of a mid-2015 deadline to repay the U.S. and Canadian governments, AP reports.

GM is able to make the payments ahead of schedule because it performed better than expected during its 40-day stay in bankruptcy and the company's sales and overall performance since then have been modestly better than expected, AP says, citing a person familiar with the matter.

The Journal says GM's move to repay the loan could be controversial and risky as it draws on $13.4 billion it has in an escrow account that came from its U.S. bailout. Under its government agreement, GM can use taxpayer money to repay the loan.

-- Reported by Joseph Woelfel in New York .

Follow TheStreet.com on Twitter and become a fan on Facebook.

>To order reprints of this article, click here: Reprints