General Motors Looks to Stockpile More Cash With Note Sale

GM is targeting a total in the "low billions" as it seeks to stockpile cash amid idled plants and stalled car and truck sales.
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Shares of General Motors  (GM) - Get Report rose Thursday after the country’s biggest automaker said in a Securities and Exchange Commission filing that it is offering three sets of senior notes in a bid to bolster its cash reserves.

While it did not specify the amount, coupon or maturity of the notes, the automaker said they will be unsecured with fixed rates, with a target total in the "low billions," according to media reports.

GM is trying to conserve cash as the coronavirus pandemic has closed all of its North American plants since March, and as would-be car and truck buyers remain stuck at home. The company has suspended its share buybacks and its dividend.

According to the filing, the proceeds raised in the offering will be used for “general corporate purposes.”

On Wednesday, GM reported profit of $294 million for the first quarter, but likely faces major losses this quarter.

As of March 31, GM had $33.4 billion of cash, cash equivalents, marketable debt securities and funds available under credit facilities for its automotive operations. It drew down $16 billion from its revolving credit facilities in March.

Morningstar analyst David Whiston is bullish on the company. “We don’t see a reason to change our fair value estimate [$48],” he wrote in a report Wednesday.

“Management said even if GM cannot sell any vehicles, it has liquidity to get into fourth quarter based on GM burning about $2 billion a month, better than we estimated.”

GM shares recently traded at $22.68, up 3.61%. The stock has dropped 35% over the past three months, compared to a 13% decline for the S&P 500 index.