“When will GM finally pay us back?”
It’s a question I hear a lot from readers who are concerned about the effects of GM’s 2009 bailout.
Many are surprised to hear that General Motors Company (NYSE:GM) already has paid back its bailout loans from the U.S. government.
General Motors Company (NYSE:GM) has completely satisfied the terms of the deals it made with the U.S. Treasury back in 2009. There’s nothing left for GM to do. But that doesn’t mean that taxpayers have been paid back.
In fact, they haven’t — and they might not ever be paid in full. Here’s why.
GM has done its share, but taxpayers are still in the hole
GM received a total of $49.5 billion from the U.S. government as part of its “bailout.” That money funded General Motors Company (NYSE:GM)’s high-speed bankruptcy proceeding and allowed the company to get back on its feet once it had exited bankruptcy in mid-2009.
That $49.5 billion was a loan, and under the terms of that loan, General Motors Company (NYSE:GM) agreed to pay it back with a mix of cash and stock – stock in the “new GM” that was created during the bankruptcy proceeding and given to the government at that time.
GM has complied with those terms. In fact, the company repaid its debt years ahead of schedule. But as you’ll see in a minute, there’s a problem: GM’s stock price isn’t high enough to repay the full $49.5 billion.
That means that the U.S. Treasury, which is in the process of selling off its remaining General Motors Company (NYSE:GM) stock holdings, is going to come up short once all of those sales are completed. How short? Read on.
A breakdown of GM’s repayment to date
Of that $49.5 billion that was lent to GM, the U.S. Treasury has so far recovered about $35.4 billion. Here’s how it breaks down:
GM paid back $6.7 billion in cash, the last of which was paid in April 2010. That was when then-CEO Ed Whitacre declared in TV ads that GM’s debt had been “paid in full.” (I bet he wishes now that he hadn’t said that.)
$13 billion via GM’s IPO, back in 2010. GM didn’t actually get any money from its own IPO – it was done primarily in order to let the government sell off part of its holdings. The Treasury Department sold about 45% of its total GM stock holdings in the IPO.
The U.S. received another $2.1 billion when General Motors Company (NYSE:GM) bought back some preferred stock from the Treasury in late 2010.
The U.S. got another $5.5 billion when GM bought back 200 million shares of its stock from the Treasury last December. At the time, GM and the Treasury agreed that Treasury would sell its remaining holdings gradually, on the open market.
Treasury has received about $8.1 billion from its sales of GM stock on the open market since the beginning of 2013.
That leaves about $14.1 billion of the $49.5 billion loan still unpaid, and the Treasury Department with about 113 million shares of GM stock left to sell.