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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who started this subject	6/13/2003 10:23:46 AM
From: russwinter	of 110194

Reuters Moody's Cuts General Motors Credit Rating Friday June 13, 9:21 am ET By Alex Clelland LONDON (Reuters) - Credit rating agency Moody's Investors Service (News - Websites) said on Friday it had cut U.S. auto giant General Motor's (NYSE:GM - News) long-term credit ratings by one notch to Baa1 from A3, and said it could cut the ratings again. The long-term rating of finance unit General Motors Acceptance Corp (GMAC) was also cut to A3 from A2 and its short-term rating to Prime-2 from Prime-1. The existing Prime-2 short-term rating for General Motors was affirmed. The outlook for all the ratings is negative, Moody's said. "The downgrade ... reflects Moody's expectation that the intensifying competitive environment in North America, in combination with large pension and other post-employment benefits (OPEB) funding obligations, will result in the company's automotive earnings, cash generation, and debt protection measures remaining weak through 2003," the ratings agency said in a statement. Moody's said the negative outlook reflects its concerns that the competitive environment in the U.S. could become even more intense, that weakness in the U.S. economy and consumer sentiment could extend well into 2004, and that GM might fall short of reaching operating and financial objectives. "Adverse developments in any of these three areas could contribute to further downward pressure on the rating," the agency said. "Despite the possibility of further intermediate-term pressure on the GM rating, the company's liquidity position and operating fundamentals should enable it to remain well positioned within the Baa rating category during the next 24 months." The yield on GMAC's 6.125 percent euro bond due March 2007 (US014470999=) rose 10 basis points to 247 basis points over benchmark government debt in the wake of the downgrade, dealers said. Bond yields rise as prices fall. Moody's said that it will closely monitor both the competitive conditions in the U.S. market, and GM's ability to successfully achieve key elements of its strategic and operating plan over the next six to 12 months. -- Additional reporting by Richard Barley.

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