GM may sell first bonds since 2004 as debt rallies

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Sept 11: General Motors Corp is planning its bond market comeback.

General Motors Acceptance Corp., the finance subsidiary of the world’s biggest car maker, may sell the first bonds in two years once a group of buyout firms purchases a stake in the unit, said Joanne Krell, a spokeswoman for GMAC in Detroit. The sale may be completed by the end of the year, she said.

A return to the bond market would signal increasing investor confidence after the company’s credit ratings were cut to non-investment grade in May, 2005. GMAC debt, a benchmark for investors for more than 30 years, rallied in the past 12 months.

“At the end of the year, GMAC’s probably going to be back in investment grade,” said Daniel Fuss, who oversees more than $23 billion in fixed income as vice-chairman of Loomis Sayles & Co. in Boston. “On that basis, the bonds are cheap.” GM’s junk bonds are recovering as CEO Rick Wagoner closes plants, cuts jobs and sells more than $17 billion of assets after posting a $10.6 billion loss last year, the first since 1992. He’s also negotiating an alliance with Renault SA and Nissan Motor Co. as well as the $14 billion sale of a majority in GMAC to a group led by New York-based private equity firm Cerberus Capital Management.

GMAC’s 8% bonds have risen to 101 cents on the dollar from 89.125 cents in March, according to Trace, the NASD’s bond-price reporting system. The yield on the bonds, which moves inversely to the price, has fallen to 7.91% from a high of 9.11% six months ago.

The bond’s 2.79 percentage points yield premium to treasuries is about the same as in October 2001 when the debt was sold.