Right at the close of trading Fitch and the other rating agencies cut General Motors debt ratings. In particular Fitch was quite specific that GM will either be bailed out or will be forced to default and restructure.
"Given the current liquidity level of $16.2 billion and the pace of negative cash flows, Fitch expects that GM will require direct federal assistance over the next quarter and the forbearance of trade creditors in order to avoid default."
In addition, and perhaps unrelated, AIG has moved its 3Q 08 financial results from after the close of trading on Monday to 6 AM, before the Bell.
Another late Sunday night before the start of Asia trading?
Fitch Places GM's 'CCC' IDR on Rating Watch Negative
07 Nov 2008 3:57 PM (EST)
Fitch Ratings-New York- Fitch Ratings has placed the Issuer Default Rating (IDR) of General Motors (GM) on Rating Watch Negative as a result of the company's rapidly diminishing liquidity position.
Given the current liquidity level of $16.2 billion and the pace of negative cash flows, Fitch expects that GM will require direct federal assistance over the next quarter and the forbearance of trade creditors in order to avoid default.
With virtually no further access to external capital and little potential for material asset sales, cash holdings are expected to shortly reach minimum required operating levels.
GM remains dependent on the capacity and willingness of its suppliers to continue extending trade credit, as the company does not have sufficient resources to finance ongoing operations in the event that trade credit is curtailed.
Over the intermediate term, GM's expanded debt load and debt service costs, when combined with significantly reduced earnings capacity, indicate that material improvement in the balance sheet is unlikely absent a restructuring of the balance sheet. This could eventually take place through a distressed debt exchange.
Fitch believes that direct federal aid is highly likely to be forthcoming, although the amount, timing, structure and term remain uncertain. Without material federal assistance in the short term, Fitch would review the rating for a potential downgrade to 'CC', which indicates that default is probable.
Given the extended cash drains expected through at least 2009 and the need for balance sheet restructuring, provision of federal assistance may not preclude a downgrade to 'CC'.
Deteriorating macroeconomic conditions and the effects of the credit crisis continue to ratchet down retail sales volumes and to expand negative cash flows.
Restructuring costs, other one-off items, and working capital outflows have exacerbated operating losses, factors that will continue to hamper any recovery in the near term. The rationing of retail financing highlights the tremendous capital advantage held by transplant manufacturers, further impairing near-term volume and pricing potential.
In addition, Fitch has placed the following on Rating Watch Negative:
--Senior secured at 'B/RR1';
--Senior unsecured at 'CCC-/RR5'.
General Motors of Canada Ltd.
--Long term IDR 'CCC';
--Senior unsecured at 'CCC-/RR5'.
