(Reuters) – General Motors Corp (GM.N: Quote, Profile, Research)needs to raise about $9 billion over the next two years to refinancedebt, and may seek more for operational cash burn as it facesproduction headwinds and commodity price increases, Lehman Brothersanalyst Brian Johnson said.
GM will need to refinance close to $8.7 billion of debt due betweennow and January 2010, as well as absorb additional cash burn of closeto $11 billion, Johnson said.
"When we last looked in depth at the GM liquidity position in March,GM credit spreads had spiked close to their widest levels of late 2005and about 1000 basis points wider than their lowest point in 2007," hesaid in a note to clients.
Johnson said as the overall high yield market improved, GM spreadstightened about 300 basis points while rival Ford Motor Co (F.N: Quote, Profile, Research) spreads tightened more than 400 basis points, indicating greater relative comfort with Ford’s liquidity position.
Last week, Fitch Ratings said both GM and Ford will continue to faceheavy cash drains in 2008 and are likely to burn cash through 2009unless industry sales rebound.
GM will likely see its liquidity eroded due to operating losses inthe North American market and restructuring costs, Fitch said, addingthat the company faces the risk of another ratings downgrade this year.
GM, which lost a combined $51 billion over the past three years,acknowledged at its annual Banker meeting that it would likely need toseek additional liquidity if selling conditions do not materiallyrebound in the second half of 2008, Lehman’s Johnson said.
The company also said many of the steps it was taking to reducerisks related to its Residential Capital LLC mortgage unit as well asto auto-parts suppliers Delphi Corp DPHIQ.PK and America Axle &Manufacturing (AXL.N: Quote, Profile, Research)will result in a cash outflow of $1.7 billion this year, Johnson, whomaintained his "equal weight" rating and $24 price target on the stock,added.
Shares of the company closed at $20.20 Tuesday on the New York Stock Exchange.
(Reporting by Tenzin Pema in Bangalore; Editing by Pratish Narayanan)
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