Moody’s Investors Service has cut its ratings on General Motors for the third time since August, citing the automaker’s disclosure that accounting restatements may affect access to a $US5.6 billion standby credit facility.
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At the same time, Reuters added, Standard & Poor’s said it may lower its ratings on the automaker.
The report said GM, which lost $10.6 billion last year, late on Tuesday filed its delayed annual report, restating several years of financial results.
The restatements “could result in the acceleration of as much as $3 billion in various lease obligations and in the company potentially not being be able to borrow under its $5.6 billion unused revolving credit facility,” Moody’s said in a statement cited by the news agency.
“At a minimum, GM could have to seek waivers on financial reporting requirements from lenders, which could put pressure on its liquidity,” S&P said in the statement.
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By GlobalDataThough GM should have adequate liquidity to repay the affected lease obligations if necessary, this reduction in liquidity increases the company’s risk profile at a time when it faces considerable ongoing operating and competitive challenges, Moody’s said, according to Reuters.
These include dealing with labour issues at Delphi, financial pressure on its domestic supplier base, erosion in US market share, the effective implementation of restructuring initiatives, and completing the sale of a controlling stake in its finance unit, General Motors Acceptance, Moody’s reportedly said.
Reuters said Moody’s cut GM’s senior unsecured debt one notch to “B3,” six levels below investment grade, from “B2.” The outlook is negative, meaning another cut is likely over the next 12 to 18 months. GMAC’s ratings are unaffected.
S&P’s long-term “B” rating on GM is already five steps below investment grade, the report added.
As stated in GM’s filing on Tuesday, the automaker has adequate liquidity, balance sheet strength and financial flexibility to meet its capital requirements, GM spokeswoman Gina Proia told Reuters.
“It’s also important to note that we have not previously drawn on the credit line and have no intention of doing so,” she reportedly said.
A rating downgrade would likely have less impact on GM’s bond prices than ongoing issues at Delphi and whether the automaker sells a stake in its finance arm, Brad Rubin, a senior credit analyst at BNP Paribas, told the news agency.
“At this point, ratings aren’t as crucial as they used to be,” Rubin told Reuters.
