DBRS Downgrades General Motors to C, Ratings Remain Under Review with Negative Implications

DBRS has today downgraded the long-term ratings of General Motors Corporation (GM or the Company), including GM’s Issuer Rating to C from CC. The ratings of the Company remain Under Review with Negative Implications, where they were placed on April 27, 2009. The ratings action follows the Company’s announcement that its debt exchange offers (the Exchange) would not be consummated as the minimum tender condition of 90% of the aggregate principal of outstanding notes had not been satisfied as of the May 26, 2009, expiry date.

DBRS notes that the expiration of the Exchange has significantly increased the likelihood that the Company will file for Chapter 11 bankruptcy protection in the United States (in which case it is also likely that GM would concurrently file for protection under the Companies’ Creditors Arrangement Act (CCAA) in Canada.). GM announced that its board of directors will be meeting to discuss the Company’s next steps.

The Company remains under a June 1, 2009, deadline imposed by the Obama administration by which GM is to complete its revised restructuring plans that would establish its viability going forward and thereby qualify for further funding assistance from the U.S. Government. To this end, GM has been actively involved in negotiations with its various stakeholders, including the United Auto Workers (the UAW), the Canadian Auto Workers (the CAW) as well as its unsecured creditors. DBRS notes that the Company has been able to reach new agreements with both the UAW and the CAW. GM is also attempting to reach an agreement with respect to the financial and legal separation of its European subsidiary Adam Opel GmbH (Opel).

However, at this point it appears that the unexecuted Exchange will likely result in GM’s filing for bankruptcy protection on or prior to June 1, 2009. DBRS notes that the bankruptcy process of Chrysler LLC (Chrysler) has been progressing rapidly; with indications suggesting that Chrysler could emerge from bankruptcy protection in as little as 60 days. However, DBRS notes that GM’s operations and stakeholders are more extensive and diverse than Chrysler’s. As such, an expedited bankruptcy of GM could prove more challenging.
Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Automotive, which can be found on our website under Methodologies.

This is a Corporate rating.