GM let go of a tiger by the tale, substituting cheaper debt to buy back the costly preferred shares.
General Motors Company (NYSE: GM) announced today that it has redeemed all 156.1 million outstanding shares of its Series A Preferred Stock from the UAW Retiree Medical Benefits Trust (VEBA) and Canada Gen Investment Corporation for the total amount of $3.9 billion, including accumulated dividends.
The shares had a liquidation preference of $25 per share and accrued cumulative dividends at a rate equal to 9% annually, which was an expensive ~$350 million annual cost.
GM previously this year took on much cheaper debt to facilitate the buybacks. GM bought 140 million shares from the VEBA, and 16.1 million shares from Canada Gen Investment Corporation. Because of the redemption of the preferred shares, a reduction in net income attributable to common stockholders of about $800 million will be recorded in Q4 of 2014, which will be treated as a special item.
The VEBA held the majority of the preferred shares – 260 million shares of GM’s Series A as part of the 2009 bankruptcy and government bailout. GM bought 120 million shares from the trust in September 2013 for $3.2 billion.
About Ken Zino
Ken Zino, editor and publisher of AutoInformed, is a versatile auto industry participant with global experience spanning decades in print and broadcast journalism, as well as social media. He has automobile testing, marketing, public relations and communications experience. He is past president of The International Motor Press Assn, the Detroit Press Club, founding member and first President of the Automotive Press Assn. He is a member of APA, IMPA and the Midwest Automotive Press Assn.
He also brings an historical perspective while citing their contemporary relevance of the work of legendary auto writers such as Ken Purdy, Jim Dunne or Jerry Flint, or writers such as Red Smith, Mark Twain, Thomas Jefferson – all to bring perspective to a chaotic automotive universe.
Above all, decades after he first drove a car, Zino still revels in the sound of the exhaust as the throttle is blipped during a downshift and the driver’s rush that occurs when the entry, apex and exit points of a turn are smoothly and swiftly crossed. It’s the beginning of a perfect lap.
AutoInformed has an editorial philosophy that loves transportation machines of all kinds while promoting critical thinking about the future use of cars and trucks.
Zino builds AutoInformed from his background in automotive journalism starting at Hearst Publishing in New York City on Motor and MotorTech Magazines and car testing where he reviewed hundreds of vehicles in his decade-long stint as the Detroit Bureau Chief of Road & Track magazine. Zino has also worked in Europe, and Asia – now the largest automotive market in the world with China at its center.
