GM to repay taxpayers $2.1B as it prepares for IPO

By Reuters
Posted Oct. 29, 2010 at 7:23 a.m.

In a series of moves that pave the way for an IPO and strengthen its finances, General Motors Co. said on Thursday it would repay $2.1 billion to U.S. taxpayers and make early payments to pension and retiree health plans.

The announcement comes just days before bankers are expected to begin a road show for potential investors in an initial public offering that would allow the U.S. government to start to reduce its stake in the top U.S. automaker.

GM said that after its IPO it would contribute at least $4 billion in cash and $2 billion of common stock to a pension fund for U.S. hourly and salaried workers and buy back the preferred shares at a 2 percent premium. GM has repaid a $2.8 billion note provided to the United Auto Workers union’s retiree health care trust.

Overall, those actions take $11 billion off GM’s balance sheet and cut its payments for net interest and preferred dividends by $500 million per year, GM said. GM has been paying 9 percent in dividends or interest on the preferred shares and UAW note.

Separately, GM said it had reached an agreement with banks for a $5 billion credit facility the automaker has said was needed before it could complete an IPO.

The 10 major banks underwriting GM’s IPO have committed $375 million each to the credit line and about 10 other banks have been added in to draw global investors, people familiar with the matter said.

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