GM, with $75 bn in cash in reserves, bought AmeriCredit, a small subprime lender, in an all cash deal for $3.5 bn. GM is also currently in bankruptcy.
AmeriCredit, which is rated BB by Fitch, was put on watch by Fitch, after the deal announcement.
Fitch is unsure whether the deal will help or hurt the debt rating of AmeriCredit.
A giant, though bankrupt, company, that is effectively a ward of the state, with an upcoming IPO being steered by US Treasury, is buying a tiny subprime lender for all cash – and Fitch says it can’t tell which is the good company and which is the bad.
That is the current state of finance, rating agencies and Treasury department machinations, in a nutshell.
The officers of AmeriCredit probably don’t care either way though, because they all just got cashed out.
h/t anonymous.
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That is our tax revenues at work, my friends.
That’s what you get when a Fascist government gets in bed with corporate losers like GM.
Vinny
The taxpayers are also subsidizing the production of electric/hybrid vehicles which few can afford. I grew up in the birthplace of GM (Flint) and the two houses I lived in are abandoned and worth less combined than a hybrid. The Soviet Union, or Cuba, could only inflict this kind of destruction. Yet a large segment of the population is so beaten down, and made utterly dependent on the government for a pitiful check, that their fate is to die in the weeds, along with their city.
I’ve read that Wall Street is the final, ultimate, holder of the automobile industry paper, so the bailouts are really for Wall Street.
Who trusts the rating agencies anyway. They proved they have no ethics and are willing to be less that truthful for a slight fee. The way to fix them is that issues are assigned by lottery to 2 of the 3 agencies (hopefully you can add more) and the issuer must take the ratings. You also then abolish the need for a marketing department in the ratings agencies.
Ummm, what influence did the exclusion of auto dealers and companies from FinReg have on their decision to make this purchase?
Great observation. The venality of the US finance corporate fascist government is unlimited.
Why are we continuing to let GM suck on the teat of the American taxpayer as a parasitic ward of the state while it’s buying up American junk like AmeriCredit and while it’s building car factories in China, instead of here in the US? Why are we rewarding GM for being more loyal to the Chinese economy than it is to ours? If this is what the global economy is all about and China is the center of it all, no American should want it. And thus No American should want to see GM survive as a teat-sucking parasite of the state while it’s helping build up China’s economy at great cost to our own economy.
Re: Why are we continuing
“We” who?
Bravo Cynthia! You said it.
In March, GM had $23 billion of cash on the balance sheet. Would the anonymous poster of this post like to explain where the other $52 billion of hypothetical cash reserves came from? Thanks.