General Motors has renewed its $1.95 billion, 364-day revolving credit facility for the “exclusive” use of its captive finance arm GM Financial, the company reported in a Securities and Exchange Commission filing last week. The credit line matures April 13, 2021.
The credit line has been tapped to finance GMF’s “working capital needs and for general corporate or entity purposes,” a company spokeswoman told Auto Finance News.
Under the terms of agreement, the facility requires GM and GMF to maintain an investment grade corporate rating from at least two rating agencies, including Fitch Ratings, Moody’s Investors Service and S&P Global. Also, GM must maintain at least $4 billion in global liquidity and at least $2 billion in U.S. liquidity.
The Detroit-based automaker is rated BBB — which is two levels above junk — by S&P and Fitch Ratings. S&P placed GM on “credit watch” with a negative outlook March 25 as a result of the pandemic, the rating agency reported. Moody’s, too, placed GM on a downgrade watch March 25.
The rating actions by S&P and Moody’s come on the heels of the automaker’s March 24 announcement that GM would draw down about $16 billion on its revolving credit facilities.
While GM’s weaker credit profile could have negative consequences for GMF’s access to funding in the future, the captive holds a $24 billion liquidity cushion to navigate through the crisis without capital from its parent GM, the company spokeswoman noted.
Moreover, GMF indicated that the $24 billion of liquidity should “support at least six months of cash needs, including new originations, without access to capital markets.” Still, the lender injected $800.48 million of prime auto loan receivables on April 13 — the same day the credit facility was renewed — in its second securitization of the year.
GMF’s originations last year clocked in at $43.4 billion, according to Big Wheels Auto Finance Data.
Earlier this month, General Motors reported its sales declined 7% year over year as the OEM delivered 618,335 vehicles, according to its first-quarter 2020 figures. Halted production also contributed to a decline in inventory, down nearly 18% YoY.
