General Motors 2011 Annual Report Download - page 124

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Wholesale Financing
Wholesale financing represents arrangements, primarily with Ally Financial, where cash is received in advance of the final sale of
vehicles, parts and accessories to our dealers or ultimate consumer. These obligations typically settle through the sale and delivery of
our product and generally do not require cash outflows to settle. Balances under these facilities fluctuate period to period based on the
volume of vehicles financed.
HCT Notes
As part of the establishment of the Health Care Trust (HCT) to provide retiree healthcare benefits to certain active and retired
employees in Canada, we issued notes to the HCT with a fair value of $1.1 billion in October 2011. We recorded a premium of $42
million at issuance. The notes accrue interest at an annual rate of 7.0%. The notes are due in periodic installments through 2018. We
may prepay these notes at any time. Refer to Note 18 for additional information on the HCT settlement.
Korea Preferred Shares
GM Korea has non-convertible mandatorily redeemable preferred shares outstanding of $978 million and $835 million at
December 31, 2011 and December 31, 2010. Dividends accrue at a rate of 2.5% through October 2012 at which time the rate increases
to 7.0% and remains in effect through 2017. The preferred shares are redeemable in periodic installments through 2017. In February
2011 we provided a guarantee to repurchase the preferred shares according to the redemption schedule if GM Korea does not have
sufficient legally distributable earnings to redeem the shares. GM Korea has the option to redeem the shares early provided sufficient
legally distributable earnings exist.
Secured Revolving Credit Facility
In October 2010 we entered into a five year, $5.0 billion secured revolving credit facility which includes a letter of credit
sub-facility of up to $500 million. Additionally, we can use collateral under the revolving credit facility to support up to $2.0 billion
of other obligations. While we do not believe that we will draw on the secured revolving credit facility to fund operating activities, the
facility is expected to provide additional liquidity and financing flexibility. Availability under the secured revolving credit facility is
subject to borrowing base restrictions.
Our obligations under the secured revolving credit facility are guaranteed by certain of our domestic subsidiaries and by
substantially all of our domestic assets, including accounts receivable, inventory, property, plants, and equipment, real estate,
intercompany loans, intellectual property and trademarks. Obligations are also secured by the equity interests in certain of our direct
domestic subsidiaries, as well as up to 65% of the voting equity interests in certain of our direct foreign subsidiaries, in each case,
subject to certain exceptions. The collateral securing the secured revolving credit facility does not include, among other assets, cash,
cash equivalents, marketable securities, as well as our investment in GM Financial and our equity interests in our China JVs and in
GM Korea. If we receive an investment grade corporate rating from two or more of the credit rating agencies: Fitch Ratings, Moody’s
Investor Service and Standard & Poor’s, we may no longer have to post collateral under the terms of the facility.
Interest rates on obligations under the secured revolving credit facility are based on prevailing per annum interest rates for
Eurodollar loans or an alternative base rate plus an applicable margin, in each case, based upon the credit rating assigned to the debt
evidenced by the secured revolving credit facility.
UST Credit Agreement
On July 10, 2009 we entered into a loan agreement with the UST, as amended (UST Credit Agreement) and assumed debt of $7.1
billion maturing on July 10, 2015 which Old GM incurred under its secured superpriority debtor-in-possession credit agreement with
the UST and EDC (DIP Facility). In April 2010 we repaid the full outstanding amount of $4.7 billion using funds from our escrow
account. Amounts repaid under the agreement may not be reborrowed.
122 General Motors Company 2011 Annual Report