General Motors plans to repurchase 120 million shares of its Series A Preferred Stock from the UAW Retiree Medical Benefits Trust (UAW VEBA) for a total cash consideration of approximately $3.2 billion or $27 per share, which further unwinds the agreement from 2009.
In effect of the buyback, GM is effectively a refinancing to lower the interest rate it pays on the obligations. UAW VEBA currently holds 260 million shares of Series A Preferred Stock, with an additional 16 million shares held by Canada Holdings. The shares have a liquidation preference of $25 per share and accrue cumulative dividends at a rate equal to 9 percent annually.
GM expects to record a charge of approximately $800 million in the third quarter expense sheet, because the company will pay $3.2 billion to acquire shares that it had previously recorded at a $2.4 billion value on its balance sheet.
After the deal, the the VEBA trust will own about $3.5 billion in preferred shares, while the Canadian government will own $400 million in preferred shares.