General Motors (GM) successfully executed the biggest capital markets financing ever, raising $13.4bn for GM and $4.5bn for GM Acceptance Corporation (GMAC), $4.9bn more than the launch target.
The basic premise behind the deal was to take advantage of attractive market conditions to term out GM’s near-term cash pension contribution commitments without compromising GMAC’s access to the market.
The three-currency, three-issue, 11-tranche structure effectively and efficiently tapped all available pockets of demand, achieved on terms generally within or better than original expectations.
“GM was looking to raise more money in the bond market than any company before, so we had to structure a deal with multiple tranches in multiple maturities and currencies to appeal to as broad an investor base as possible,” said Raj Dhanda, co-head of global debt syndicate at Morgan Stanley.
Over 1000 investors worldwide participated and the transaction was massively oversubscribed with close to $40bn in orders. In particular, strong overseas demand provided extra momentum on all tranches.
Jeff Tannenbaum, a debt syndicate banker at Merrill Lynch in London, said: “Investors, particularly those in Europe who follow bond indices closely, simply could not ignore this deal in terms of size and competitive pricing.”
Wylie Collins, managing director in US debt capital markets at Merrill Lynch in New York, said: “The driving force behind the huge aggregate demand for the bonds was that GM approached every investor base with bond tranches that were fairly priced and suitably sized in the context of the offering.”
In hindsight, the timing was exceptional – both convertible and straight debt markets are materially weaker today.
This was a landmark transaction in many ways: it was the biggest corporate financing in history, the biggest debt issuance ever and the biggest 30-year euro issue ever.
