GM Ratings Affirmed By Fitch IBCA On Hughes Restructuring
2 February 2000
GM Ratings Affirmed By Fitch IBCA On Hughes Restructuring
NEW YORK--Feb. 2, 2000--General Motors Corporation's (GM) 'A' senior debt and `F1' commercial paper ratings are affirmed by Fitch IBCA following GM's announcement that it plans to restructure its economic interest in Hughes Electronics Company (Hughes).GM holds its economic interest in Hughes through a tracking stock, GMH.
The restructuring is composed of two transactions. In the first, GM will contribute up to $7 billion of Class H stock to its US hourly employees' pension plan and to its VEBA trust for post-retirement obligations. In the second, GM will offer to exchange approximately $8 billion of Class H stock for GM $1 2/3 common stock.
As a result, GM's economic interest in Hughes will decline to approximately $18 billion, or 35% from the current 68% valued at some $33 billion. GM will continue to own 100% of the assets of Hughes. GM expects to complete these transactions by June 30, 2000.
GM will benefit in that it will pre-fund pension contributions for some years, freeing cash for other business opportunities. To the extent that pensions and post-retirement obligations are pre-funded, earnings will benefit from lower costs. Thus, the company's financial flexibility will be enhanced considerably.
In retaining an economic interest, GM will also benefit from the upside potential in Hughes' communication services growth.