General Motors has announced that it has acquired an unsecured $16.5 billion revolving credit line.
Officially referred to as a revolving credit facility in banker speak, the new $16.5 billion line amends and extends the automaker’s previous line of $14.5 billion, while establishing a new $2.0 billion facility that has a 364-day payback period, otherwise known as a 364-day facility.
The new $16.5 facility consists of several facilities, as follows:
- $10.5 billion five-year facility
- $4.0 billion three-year facility
- $2.0 billion 364-day facility
That new $2.0 billion, 364-day facility is earmarked for exclusive use by GM Financial, General Motors’ captive finance arm. As such, the total available credit available to GM’s core automotive operations remains unchanged at $14.5 billion.
It’s worth noting that a revolving credit line is one that does not have a fixed number of payments, and is the opposite of an installment type of credit. Revolving facilities are typically used to provide liquidity for a company’s day-to-day operations. In a revolving credit arrangement, the client (in this case GM) can withdraw, repay, and redraw again the loan amount in any manner and any number of times, until the arrangement expires.
GM states that a total of “47 financial institutions from 15 countries participated in the broadly-syndicated transaction, underscoring the global scope of GM’s operations.”
The GM Authority Take
This new revolving credit facility is welcome news for the General, as it gives the automaker $2 billion more breathing room for its financial needs as part of day-to-day operations, as well as new funds allocated specifically for GM Financial, which has been growing at a very impressive pace. The captive finance arm reported $400 million in earnings before taxes (EBT) in the first quarter of 2018, which is nearly double its performance on an annual basis.