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GM CEO: Automaker could repay government loans early

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GM CEO: Automaker could repay government loans early

12/11/2009, 12:13 PMBY ANDREW GANZ

General Motors has said that it will begin making quarterly payments on the loans it took from the United States Treasury later this month, and now the automaker’s acting CEO, Ed Whitacre, says the company may pay the balance of its loans earlier than next June.

“We’ve thought about it. We’ll be looking at that possibility,” Whitacre said online during a chat with the media.

GM is expected to pay $1 billion to the U.S. government this month, but the company will take that money from a $17.4 billion escrow account funded by the government. If it sounds a little backwards, it’s because it is: GM is intending to use federal funds to pay back a federal loan.

Whitacre did not specify when GM would complete its first public stock offering – a vital step that would allow the governments of the U.S. and Canada to sell of their shares of the automaker.



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What??? They must be talking about a very specific loan, because even if GM is wildly profitable for decades, they won't come close to paying off the $60 billion or whatever it is.

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Things changed when GM went bankrupt and split into old and new GM. They struck up a deal with the Treasury Department during bankruptcy that converted most of the debt to preferred and common stock. So basically, GM has to repay about $6.71 billion worth of loans and repurchase $2 billion in preferred stock in order to pay back the government. The government will make about $40 billion profit when they sell their 60% stake in GM common stock when it goes public. Where are they getting the $6 billion plus to repay by June? From unused TARP funds, about $13 billion worth.

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