Motors Liquidation Company (fka MTLQQ)

[MWM]

S&P cuts GM unsecured debt further into junk
Monday December 22, 6:41 pm ET
S&P cuts General Motors unsecured debt rating further into junk status following loans


NEW YORK (AP) -- Standard & Poor's Ratings Services on Monday cut its ratings on General Motors Corp.'s unsecured debt further into junk status, following its deals to receive loans from the U.S. and Canadian governments.


S&P cut its issue-level ratings on unsecured debt from GM and General Motors of Canada to "C" from "CC," and revised its recovery rating on GM's debt to "6" from "4," indicating that lenders can expect to recover 10 percent or less of their funds in the event of a payment default.

In addition to loans from the U.S. and Canadian governments, Germany and Sweden have also indicated they might make loans to GM in those countries, S&P analyst Robert Schulz noted, which would "further diminish the value to unsecured creditors of the equity in foreign subsidiaries."

"We expect these U.S. and Canadian government loans to be backed by a security package that includes currently unencumbered assets, which would lead to a significant decrease in value for unsecured debtholders in the event of a bankruptcy or payment default," Schulz said.

S&P kept its corporate credit rating of "CC" with a negative outlook for GM, saying that the likelihood of the automaker initiating a distressed debt exchange is already reflected.