GM Empties Credit Facility

The company grabs $3.4 billion to guard against a continuation of the credit crunch, depleting a cache of emergency liquidity.

As expected, General Motors has drawn down the remaining $3.4 billion of a $4.5 billion credit agreement that it established with a group of banks two years ago.

The collateral for the credit consists of North American accounts receivable and inventory of GM, Saturn Corp., and General Motors of Canada; plants, property, and equipment of General Motors of Canada; and 65 percent of the stock of the indirect subsidiary General Motors de Mexico.

GM chairman and CEO Rick Wagoner told the Associated Press that the company exercised the credit line as a defensive move to preserve liquidity in case the credit markets continue to be tight. “These are very unsettled times in the market, and we just thought that under the circumstances it made sense that we would have that money in case that we needed it,” Wagoner reportedly said Thursday at a ceremony to announce a new Flint, Michigan, engine plant.

Wagoner also said the credit markets won’t stay closed forever. In the meantime, in addition to the credit drawdown GM is cutting costs and mulling whether to sell assets and borrow more money in order to raise $15 billion in liquidity.

The bank syndicate that is the guarantor of the line of credit includes Citicorp USA as administrative agent and JPMorgan Chase as syndication agent.

GM’s move comes as other companies also are tapping credit pools. Goodyear Tire & Rubber Co., for example, drew down $600 million this week, pointing to redemption delays from $360 million of money-market deposits in the company’s reserve primary fund.

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