Short-Term and Long-Term Debt
Automotive
The following table summarizes the components of our short-term debt and long-term debt (dollars in millions):
|
| | | | | | | |
| December 31, 2013 | | December 31, 2012 |
Secured debt | $ | 320 |
| | $ | 1,182 |
|
Unsecured debt | | | |
Senior unsecured notes | 4,500 |
| | — |
|
Canadian Health Care Trust (HCT) notes | — |
| | 1,239 |
|
Other unsecured debt | 1,352 |
| | 1,713 |
|
Total unsecured debt | 5,852 |
| | 2,952 |
|
Capital leases | 965 |
| | 1,038 |
|
Total automotive debt(a) | 7,137 |
| | 5,172 |
|
Less: short-term debt and current portion of long-term debt | 564 |
| | 1,748 |
|
Total long-term debt | $ | 6,573 |
| | $ | 3,424 |
|
| | | |
Fair value of automotive debt(b) | $ | 6,837 |
| | $ | 5,298 |
|
| | | |
Available under credit facility agreements | $ | 10,404 |
| | $ | 11,119 |
|
Interest rate range on outstanding debt(c) | 0.0-19.0% |
| | 0.0-19.0% |
|
Weighted-average interest rate on outstanding short-term debt(c) | 9.0 | % | | 3.7 | % |
Weighted-average interest rate on outstanding long-term debt(c) | 3.8 | % | | 4.0 | % |
__________
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(a) | Net of a $765 million and $1.1 billion net discount at December 31, 2013 and 2012. |
| |
(b) | The fair value of debt includes $6.8 billion and $4.1 billion measured utilizing Level 2 inputs at December 31, 2013 and 2012 and $1.2 billion measured utilizing Level 3 inputs at December 31, 2012. |
| |
(c) | Includes coupon rates on debt denominated in various foreign currencies and interest free loans. |
The Level 2 fair value measurements utilize quoted market prices and if unavailable, a discounted cash flow model. The valuation is reviewed internally by personnel with appropriate expertise in valuation methodologies. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread that is intended to represent our nonperformance risk for secured or unsecured obligations. We estimate our nonperformance risk using our corporate credit rating, the ratings on our senior unsecured notes and on our secured revolver, yields on traded bonds of companies with comparable credit ratings and risk profiles. We acquire the benchmark yield curves and nonperformance risk spread from independent sources that are widely used in the financial industry. In certain circumstances we adjust the valuation of debt for additional nonperformance risk or potential prepayment probability scenarios. We may use a probability weighting of prepayment scenarios when the stated rate exceeds market rates and the instrument contains prepayment features. The prepayment scenarios are adjusted to reflect the views of market participants. The fair value measurements subject to additional adjustments for nonperformance risk or prepayment have been categorized in Level 3.
Secured Debt
Wholesale financing represents arrangements, primarily with Ally Financial, where cash is received in advance of the final sale of vehicles, parts and accessories to our dealers or ultimate consumer. These obligations typically settle through the sale and delivery of our products and generally do not require cash outflows to settle. Following GM Financial's acquisition of the Ally Financial international operations in April 2013, most of the wholesale financing balance classified as debt became intercompany debt and was eliminated in consolidation, resulting in a decrease to our automotive debt balance of $682 million.
Secured Revolving Credit Facilities
In November 2012 we entered into two new secured revolving credit facilities with an aggregate borrowing capacity of $11.0 billion. These facilities consist of a three-year, $5.5 billion facility and a five-year, $5.5 billion facility and replaced our previous five-year, $5.0 billion secured revolving credit facility. Availability under the secured revolving credit facilities is subject to borrowing base restrictions.
The three-year, $5.5 billion facility is available to GM Financial as well as certain wholly-owned domestic and international subsidiaries. The facility includes various sub-limits including a GM Financial borrowing sub-limit of $4.0 billion, a multi-currency borrowing sub-limit of $3.5 billion, a Brazilian Real borrowing sub-limit of approximately $485 million and a letter of credit sub-facility limit of $1.5 billion. We had amounts in use under the letter of credit sub-facility of $625 million at December 31, 2013.
The five-year, $5.5 billion facility allows for borrowings in U.S. Dollars and other currencies and includes a letter of credit sub-limit of $500 million. This facility is not available to GM Financial.
Our obligations under the secured revolving credit facilities are guaranteed by certain of our domestic subsidiaries and by a substantial portion of our domestic assets including accounts receivable, inventory, property, plant and equipment, intellectual property and trademarks, equity interests in certain of our direct domestic subsidiaries as well as up to 65% of the voting equity interests in certain of our direct foreign subsidiaries, in each case, subject to certain exceptions. The collateral securing the secured revolving credit facilities does not include, among other assets, cash, cash equivalents and marketable securities as well as our investments in GM Financial, GM Korea and in our China JVs. If we receive and maintain an investment grade corporate rating from two or more of the following credit rating agencies: Fitch Ratings, Moody's Investor Service and Standard & Poor's, we will no longer have to post collateral or provide guarantees from certain domestic subsidiaries under the terms of the facilities.
The secured revolving credit facilities contain representations, warranties and covenants customary of these types of facilities, including negative covenants restricting incurring liens, consummating mergers or sales of assets and incurring secured indebtedness, and restricting us from making restricted payments, in each case, subject to exceptions and limitations. These restricted payments include limitations on the amount of dividend payments and repurchases of our common stock. These restrictions can be mitigated based on various factors including but not limited to cash flows generated from operating and investing activities, prior restricted payments, our borrowing base coverage ratio, consolidated global liquidity and other provisions. The facilities also require us to maintain at least $4.0 billion in consolidated global liquidity and at least $2.0 billion in consolidated U.S. liquidity.
Interest rates on obligations under the secured revolving credit facilities are based on prevailing per annum interest rates for Eurodollar loans or an alternative base rate plus an applicable margin, in each case, based upon the credit rating assigned to the secured revolving credit facilities or our corporate rating depending on certain criteria.
Unsecured Debt
Senior Unsecured Notes
In September 2013 we issued $4.5 billion in aggregate principal amount of senior unsecured notes comprising $1.5 billion of 3.5% notes due in 2018, $1.5 billion of 4.875% notes due in 2023 and $1.5 billion of 6.25% notes due in 2043. These notes contain terms and covenants customary of these types of securities including limitations on the amount of the secured debt we may issue.
In connection with the issuance of these notes we entered into a registration rights agreement that requires us to file a registration statement with the Securities and Exchange Commission (SEC) for an exchange offer with respect to the senior notes. If the registration statement has not been declared effective by the SEC within 365 days after the closing date of the debt issuance, if we fail to consummate the exchange offer within 30 business days after such target effective date or if the registration statement ceases to remain effective, we will be required to pay additional interest of 0.25% per annum for the first 90 day period following such event and an additional 0.25% per annum for each subsequent 90 day period prior to the consummation of the exchange offer up to a maximum additional interest rate of 0.5% per annum.
HCT Notes
As part of the establishment of the HCT to provide retiree healthcare benefits to certain active and retired employees in Canada, we issued notes to the HCT with a fair value of $1.1 billion in October 2011. We recorded a premium of $42 million at issuance. The notes accrued interest at an annual rate of 7.0%. The notes were due in periodic installments through 2018. In October 2013 we prepaid the HCT notes in full for $1.2 billion. Refer to Note 15 for additional information on the HCT settlement.
GM Korea Preferred Shares
Prior to April 2013 GM Korea had outstanding non-convertible mandatorily redeemable preferred shares. Dividends accrued at a rate of 2.5% through October 2012 and increased to 7.0% through 2017. In December 2012 GM Korea made a payment of $671 million to redeem early a portion of shares that had a carrying amount of $429 million and the difference was recorded as a loss on extinguishment of debt. In April 2013 GM Korea made a payment of $708 million to redeem early the remaining balance of the shares that had a carrying amount of $468 million and the difference was recorded as a loss on extinguishment of debt.
Gains (Losses) on Extinguishment of Debt
In the year ended December 31, 2013 we prepaid and retired debt obligations with a total carrying amount of $1.8 billion and recorded a net loss on extinguishment of debt of $212 million which primarily represented the unamortized debt discount on the GM Korea mandatorily redeemable preferred shares. In the year ended December 31, 2012 we prepaid and retired debt obligations with a total carrying amount of $514 million and recorded a net loss on extinguishment of debt of $250 million which primarily represented the unamortized debt discount on the GM Korea mandatorily redeemable preferred shares. In the year ended December 31, 2011 we prepaid and retired in full debt facilities of $1.0 billion held by certain of our subsidiaries, primarily in GMNA and GMSA, and recorded a gain on these debt facilities of $18 million.
Technical Defaults and Covenant Violations
Several of our loan facilities, including our secured revolving credit facilities, require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Failure to meet certain of these requirements may result in a covenant violation or an event of default depending on the terms of the agreement. An event of default may allow lenders to declare amounts outstanding under these agreements immediately due and payable, to enforce their interests against collateral pledged under these agreements or restrict our ability to obtain additional borrowings. A foreign subsidiary was not in compliance with certain financial covenants under its $77 million term loan facility. We are evaluating alternatives to cure this financial covenant issue and included this liability in Short-term debt and current portion of long-term debt.
Automotive Financing - GM Financial
The following table summarizes the carrying amount and fair value of debt (dollars in millions):
|
| | | | | | | | | | | | | | | | |
| | December 31, 2013 | | December 31, 2012 |
| | Carrying Amount | | Fair Value(a) | | Carrying Amount | | Fair Value(a) |
Secured | | | | | | | | |
Revolving credit facilities | | $ | 9,000 |
| | $ | 8,995 |
| | $ | 354 |
| | $ | 354 |
|
Securitization notes payable(b) | | 13,073 |
| | 13,175 |
| | 9,024 |
| | 9,171 |
|
Total secured | | 22,073 |
| | 22,170 |
| | 9,378 |
| | 9,525 |
|
Unsecured | | | | | | | | |
Senior notes | | 4,000 |
| | 4,106 |
| | 1,500 |
| | 1,620 |
|
Bank lines and other unsecured debt | | 2,973 |
| | 2,972 |
| | — |
| | — |
|
Total unsecured | | 6,973 |
| | 7,078 |
| | 1,500 |
| | 1,620 |
|
Total GM Financial debt | | $ | 29,046 |
| | $ | 29,248 |
| | $ | 10,878 |
| | $ | 11,145 |
|
_______
| |
(a) | The fair value of debt includes $23.0 billion and $11.1 billion measured utilizing Level 2 inputs at December 31, 2013 and 2012 and $6.2 billion measured utilizing Level 3 inputs at December 31, 2013. For revolving credit facilities with variable interest rates and maturities of one year or less, the carrying amount is considered to be a reasonable estimate of fair value. The fair value of other secured debt and the unsecured debt is based on quoted market prices, when available. If quoted market prices are not available, the market value is estimated by discounting future net cash flows expected to be paid using current risk-adjusted rates. |
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(b) | Includes a private securitization that GM Financial used observable and unobservable inputs to estimate fair value. Unobservable inputs are related to the structuring of the debt into various classes, which is based on public securitizations issued during the same time frame. Observable inputs are used by obtaining active prices based on the securitization debt issued during the same time frame. These observable inputs are then used to create expected market prices (unobservable inputs), which are then applied to the debt classes in order to estimate fair value which would approximate market value. |
Secured
Revolving Credit Facilities
The revolving credit facilities have revolving periods ranging from one to three years. At the end of the revolving period, if the facilities are not renewed, the debt will amortize over periods ranging up to six years. Most of the secured debt was issued by VIEs and it is repayable only from proceeds related to the underlying pledged finance receivables and leases. Refer to Note 12 for additional information relating to GM Financial's involvement with VIEs. Weighted-average interest rates are both fixed and variable, ranging from 0.9% to 15.9% at December 31, 2013.
GM Financial is required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under certain secured credit facilities. Additionally, some of GM Financial’s secured credit facilities contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios (portfolio net loss and delinquency ratios and pool level cumulative net loss ratios) as well as limits on deferment levels. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements, restrict GM Financial’s ability to obtain additional borrowings under these agreements and/or remove GM Financial as servicer. At December 31, 2013 GM Financial was in compliance with all covenants related to its credit facilities.
In the year ended December 31, 2013 GM Financial entered into two new credit facilities with a total borrowing capacity of $1.3 billion. At December 31, 2013 revolving credit facilities of $7.3 billion resulted from the acquisition of the Ally Financial international operations.
Securitization Notes Payable
Securitization notes payable represents debt issued by GM Financial through securitization transactions. Debt issuance costs are amortized over the expected term of the securitizations on an effective yield basis. As a result of GM Financial's acquisition of the Ally Financial international operations, GM Financial recorded a purchase accounting discount of $69 million that will amortize to interest expense over the expected term of the notes. At December 31, 2013 the remaining purchase accounting discount of $47 million is included in Total secured debt.
At the time of securitization of finance receivables, GM Financial is required to pledge assets equal to a specified percentage of the securitization pool to support the securitization transaction. The assets pledged consist of cash deposited to a restricted account and additional receivables delivered to the trust, which create overcollateralization. The securitization transactions require the percentage of assets pledged to support the transaction to increase until a specified level is attained. Excess cash flows generated by the trusts are added to the restricted cash account or used to pay down outstanding debt in the trusts, creating overcollateralization until the targeted percentage level of assets is reached. Once the targeted percentage level of assets is reached and maintained, excess cash flows generated by the trusts are released to GM Financial as distributions from trusts. As the balance of the securitization pool declines, the amount of pledged assets needed to maintain the required percentage level is reduced. Assets in excess of the required percentage are also released to GM Financial as distributions from trusts.
In the year ended December 31, 2013 GM Financial issued securitization notes payable of $6.8 billion with a weighted-average interest rate of 1.7% maturing on various dates through 2021. At December 31, 2013 securitization notes payable of $2.3 billion resulted from the acquisition of the Ally Financial international operations.
Unsecured
Senior Notes
In May 2013 GM Financial issued $2.5 billion in aggregate principal amount of senior notes due in 2016 through 2023 with interest rates that range from 2.75% to 4.25%. In August 2012 GM Financial issued 4.75% senior notes of $1.0 billion which are due in August 2017 with interest payable semiannually. Senior notes outstanding at December 31, 2013 are due beginning in 2016 through 2023 and have interest rates that range from 2.75% to 6.75%. The notes are guaranteed by GM Financial's principal operating subsidiary.
Bank Lines and Other Unsecured Debt
The maturity dates of bank lines and other unsecured debt, which was assumed in the acquisition of the Ally Financial international operations, range up to five years. If not renewed, any balance outstanding under these bank lines is either immediately due in full or will amortize over a defined period. Interest rates on bank lines and other unsecured debt ranged from 1.1% to 12.9% at December 31, 2013.
Consolidated
Interest Expense
The following table summarizes interest expense (dollars in millions):
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2013 | | 2012 | | 2011 |
Automotive | $ | 334 |
| | $ | 489 |
| | $ | 540 |
|
Automotive Financing - GM Financial | 715 |
| | 283 |
| | 204 |
|
Total interest expense | $ | 1,049 |
| | $ | 772 |
| | $ | 744 |
|
Debt Maturities
The following table summarizes contractual maturities including capital leases at December 31, 2013 (dollars in millions):
|
| | | | | | | | | | | |
| Automotive | | Automotive Financing(a) | | Total |
2014 | $ | 543 |
| | $ | 13,594 |
| | $ | 14,137 |
|
2015 | 147 |
| | 6,473 |
| | 6,620 |
|
2016 | 109 |
| | 4,199 |
| | 4,308 |
|
2017 | 496 |
| | 2,337 |
| | 2,833 |
|
2018 | 1,582 |
| | 1,693 |
| | 3,275 |
|
Thereafter | 5,025 |
| | 750 |
| | 5,775 |
|
| $ | 7,902 |
| | $ | 29,046 |
| | $ | 36,948 |
|
________
| |
(a) | Secured debt, bank lines and other unsecured debt are based on expected payoff date. Senior notes principal amounts are based on maturity. |
At December 31, 2013 future interest payments on automotive capital lease obligations were $578 million. GM Financial had no capital lease obligations at December 31, 2013.
