Carmaker says pension, health care accounting changes would make similiar loan unlikely in '07.
November 13 2006: 7:39 PM EST


CHICAGO (Reuters) -- General Motors Corp. said Monday it plans to execute a $1.5 billion senior secured term loan by the end of 2006 in part because changes to U.S. pension and retiree health care accounting rules would make such an arrangement unlikely next year.

The changes in accounting for pensions and other post employment benefits could cause shareholders' equity in GM's year-end 2006 financial statements to be negative, which could affect its ability to pledge assets for a loan, GM (Charts) said.

GM plans to give lenders a first priority security interest in machinery and equipment and special tools located at GM's U.S. manufacturing facilities in exchange for the seven-year term loan, which would add to its liquidity, it said.

GM's sale of a controlling interest in GMAC, which it hopes to complete by the end of the year, is expected to give a much more substantial boost to its liquidity than the loan.

U.S. accounting rule makers issued a new standard for pension and other retiree benefit accounting that will require companies to place the obligation for these plans on corporate balance sheets by the end of this year.
 

Source: http://money.cnn.com/2006/11/13/news/companies/bc.autos.gm.debt.reut/index.htm