GM stock buyback: On Monday, General Motors Co. (NYSE:GM) announced its intention to repurchase around 120 million shares, or 46% of the Series A Preferred Stocks held by the UAW Retiree Medical Benefits Trust (UAW VEBA). According to a press release, this action would entail “a total cash consideration of approximately $3.2 billion of $27 per share.” In order to buy back the shares, the company has decided to issue 5, 10, and 30-year senior unsecured notes.
Further, the press release stated, that “the shares have a liquidation preference of $25 per share and accrue cumulative dividends at a rate equal to 9 percent annually.” GM can actually save money through this operation if enough debt is emitted to cover the cost of purchasing the shares.
In a Moody’s report released today, GM’s corporate rating went up to Baa3 from Ba1. Expectations are high because the company’s credit profile will continue to improve while improving its competitive positioning.
Once the buyback is finalized, the UAW trust will be left holding 140 preferred shares, while the U.S. Treasury will own 101 million shares, and the Canadian government 16 million shares.
This announcement comes after the U.S. Treasury stated it would be exiting its position in GM. According to a press release put forward in June this year, “the U.S. Department of the Treasury announced the next step in its plan to sell its approximately 241.7 million remaining shares of General Motors common stock with the initiation of a second pre-defined written trading plan.”
The Detroit based car manufacturer intends on getting the government and the union off its back. As the firm continues to improve and gain price traction, shareholders will be glad to see the repurchase of shares go through. The company will face a third-quarter charge of roughly $800 million for the GM stock buyback.
Disclosure: Pablo Erbar holds no position in any of the mentioned stocks