GM Debt Falls Well Into Junk Territory

Two major rating agencies cut General Motors Corp.’s debt rating deeper into junk territory Tuesday after the automaker said it was offering banks collateral to renew a credit facility.

GM said earlier in the day that it planned to amend and extend a $5.6-billion unsecured revolving credit facility, offering lenders collateral, better pricing and other enhancements in return for extending the maturity of the revolving facility to 2011.

The automaker disclosed this year that access to its credit facility could be threatened because of its restatement of financial results. Rating agencies had placed GM’s debt on review for downgrade at the time because of concerns that the automaker would have to offer collateral to bank lenders, leaving fewer assets for bondholders in the event of a bankruptcy filing.

GM, which lost $10.6 billion in 2005, is cutting 30,000 jobs and closing 12 plants as part of a broad restructuring effort. It is also offering early retirement incentives to more than 125,000 factory workers, including about 13,000 at its former parts subsidiary, Delphi Corp.

GM also plans to share the cost of additional buyout offers at Delphi.

Standard & Poor’s cut GM’s senior unsecured debt rating to “B-minus” from “B” and said it might cut the rating again. The bank loan was rated “B-plus.”

Moody’s Investors Service slashed GM’s senior unsecured rating to a deeply speculative “Caa1,” seven steps below investment grade, from “B3.” The outlook is negative, meaning that the rating may be cut again over the next 12 to 18 months.

Fitch Ratings affirmed GM’s rating but said it was leaving it on review for a downgrade, citing an unresolved situation at Delphi, which is operating under bankruptcy protection. Fitch rates GM “B,” the fifth-highest junk rating.

GM shares closed down 70 cents at $25.65.