General Motors Co.’s stock was up almost 10% Wednesday after the company unveiled a generous shareholder rewards plan, as it reinstated guidance for 2023 after a recent labor strike ended.
Bondholders also cheered the news, which included some bond-friendly measures, such as the cancellation of a $6.0 billion revolving-credit facility the company entered in October.
GM
GM,
is planning to enter a new 364-day $3.0 billion committed-credit facility with banks that are executing a $10 billion accelerated share-buyback program on its behalf.
S&P Global Ratings said it expects the company to fund the buyback with cash, but said it would still have plenty of liquidity. S&P said it was leaving its BBB rating on the credit unchanged.
“With automotive cash, cash equivalents, and marketable debt securities of $29 billion as of Sept. 30, 2023, we view the company as maintaining an adequate buffer to absorb the recent short-term production disruptions stemming from its union negotiations,” S&P
The car maker’s bonds were seeing net buying on Wednesday and spreads on 10-year bonds were about five basis points tighter on the day, according to data solutions provider BondCliQ Media Services.
General Motors Bonds net customer flow (intraday).
BondCliQ Media Services
The company’s most active bonds have seen net buying over the last 10 days, as the following chart illustrates.
Most active General Motors issues with net customer flow (last 10 days).
BondCliQ Media Services
Spreads have been tightening over the past two weeks.
Two-week spread performance of select GM bonds.
BondCliQ Media Services
The following chart shows GM’s maturity cliff, with about $10.5 billion coming due in 2025.
Outstanding General Motors Co. debt (USD) by maturity year.
BondCliQ Media Services
GM said it’s also planning a 33% increase in its dividend starting in January. It said the recent strike will shave about $1.1 billion off its adjusted EBIT, or earnings before interest and taxes, due to lost production.
“We are finalizing a 2024 budget that will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing our fixed and variable costs,” Chief Executive Mary Barra said in a statement.
The stock has fallen about 6% in the year to date, while the S&P 500
SPX
has gained 19%.
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