GM will need over $9 billion in new financing: Lehman
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DETROIT (Reuters) - General Motors Corp will need to raise over $9 billion in financing over the next two years to refinance existing debt and to offset projected cash losses in its auto operations in North America, Lehman Brothers analyst Brian Johnson said on Wednesday.Analysts handicapping GM's turnaround efforts have focused increasingly on its cash position rather than reported earnings because of the pressure the No. 1 U.S. automaker faces from a slump in U.S. auto sales that has hit the market for trucks and SUVs particularly hard."GM will need to refinance close to $8.7 billion of debt coming due between now and January 2010, as well as absorb additional cash burn of close to $11 billion," Johnson said in a note for clients.He added: "We remain cautious until the impact of this more fully works its way into GM valuation."GM Chief Financial Officer Ray Young on Tuesday said GM had about $7 billion in undrawn credit facilities in addition to its roughly $24 billion in liquidity as of the end of the first quarter.He said that while GM was confident of its "liquidity cushion" through 2008, it could take action to raise funds and to cut costs further if the current U.S. economic downturn deepens or becomes prolonged."If current adverse economic conditions persist or deteriorate further, we would consider a wide range of possible actions to reduce our funding needs and to obtain additional liquidity," Young said at a presentation for bankers outside Detroit.GM posted negative cash flow of $3.6 billion in the first quarter and had cash and liquid assets of $23.9 billion as of the end of March.Johnson's estimate for GM's projected operational cash burn includes $7 billion this year and $3 billion in 2009.The remainder of the total represents cash outlays GM was forced to make in recent weeks to address a range of issues that Johnson called the automaker's "hangover headline risks," mostly related to troubled former subsidiaries.That included $650 million from GM to help former subsidiary Delphi Corp emerge from bankruptcy, $200 million to help fund a settlement between the United Auto Workers union and major GM suppler American Axle &Manufacturing Holdings .GM has said the Delphi funding would be repaid when the supplier exits bankruptcy.American Axle has said it has no obligation to repay the $200 million on offer from GM. The three-month old strike has cost the automaker over 230,000 units of lost production and shuttered over 30 GM plants because of parts shortages.In addition, GM has committed to provide up to about $375 million in financing to the ResCap mortgage unit of finance company and former GM subsidiary GMAC.That financing, which is being matched by ResCap's majority shareholder, Cerberus Capital Management is meant to insure that ResCap does not run out of cash after losing $5.3 billion in the past six quarters.GM also spent $826 million to repurchase its Detroit headquarters building this year.(Reporting by Kevin Krolicki; Editing by Derek Caney)
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