General Motors 2010 Annual Report Download - page 77

GENERAL MOTORS COMPANY AND SUBSIDIARIES
UST Loans and Canadian Loan
UST Loans
Old GM received total proceeds of $19.8 billion ($15.8 billion subsequent to January 1, 2009, including $361 million under the
U.S. government sponsored warranty program) from the UST under the UST Loan Agreement entered into on December 31, 2008. In
connection with the Chapter 11 Proceedings, Old GM obtained additional funding of $33.3 billion from the UST and EDC under its
DIP Facility.
On July 10, 2009 we entered into the UST Credit Agreement and assumed debt of $7.1 billion which Old GM incurred under its
DIP Facility. Proceeds of the UST Credit Agreement of $16.4 billion were deposited in escrow to be distributed to us at our request
upon certain conditions as outlined in the UST Credit Agreement. Immediately after entering into the UST Credit Agreement, we
made a partial repayment due to the termination of the U.S. government sponsored warranty program, reducing the UST Loans
principal balance to $6.7 billion.
In November 2009 we signed an amendment to the UST Credit Agreement to provide for quarterly repayments of our UST Loans.
Under this amendment, we agreed to make quarterly payments of $1.0 billion to the UST. In December 2009 and March 2010 we
made quarterly payments of $1.0 billion on the UST Loans. In April 2010, we used funds from our escrow account to repay in full the
outstanding amount of the UST Loans of $4.7 billion. The UST Loans were repaid prior to maturity. Amounts borrowed under the
UST Credit Agreement may not be reborrowed.
At December 31, 2009 $12.5 billion of the proceeds of the UST Credit Agreement remained deposited in escrow. Any unused
amounts in escrow on June 30, 2010 were required to be used to repay the UST Loans and Canadian Loan on a pro rata basis if the
loans were not paid in full. At December 31, 2009 the UST Loans and Canadian Loan were classified as short-term debt based on
these terms.
Following the repayment of the UST Loans and the Canadian Loan, the remaining funds that were held in escrow became
unrestricted and the availability of those funds is no longer subject to the conditions set forth in the UST Credit Agreement.
The UST Loans accrued interest equal to the greater of the three month London Interbank Offering Rates (LIBOR) rate or 2.0%,
plus 5.0%, per annum, unless the UST determined that reasonable means did not exist to ascertain the LIBOR rate or that the LIBOR
rate would not adequately reflect the UST’s cost to maintain the loan. In such a circumstance, the interest rate would have been the
greatest of: (1) the prime rate plus 4%; (2) the federal funds rate plus 4.5%; or (3) the three month LIBOR rate (which will not be less
than 2%) plus 5%. We were required to prepay the UST Loans on a pro rata basis (among the UST Loans, VEBA Notes and Canadian
Loan), in an amount equal to the amount of net cash proceeds received from certain asset dispositions, casualty events, extraordinary
receipts and the incurrence of certain debt. At December 31, 2009 the UST Loans accrued interest at 7.0%.
While we have repaid in full our indebtedness under the UST Credit Agreement, the executive compensation and corporate
governance provisions of Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA), including the Interim Final Rule
implementing Section 111 (Interim Final Rule), will continue to apply to us for the period specified in the EESA and the Interim Final
Rule. Certain of the covenants in the UST Credit Agreement will continue to apply to us until the earlier to occur of (1) our ceasing to
be a recipient of Exceptional Financial Assistance, as determined pursuant to the Interim Final Rule or any successor or final rule, or
(2) UST ceasing to own any direct or indirect equity interests in us, and impose obligations on us with respect to, among other things,
certain expense policies, executive privileges and compensation requirements.
The UST Credit Agreement includes a vitality commitment which requires us to use our commercially reasonable best efforts to ensure
that our manufacturing volume conducted in the United States is consistent with at least 90% of the projected manufacturing level (projected
manufacturing level for this purpose being 1,934,000 units in 2011, 1,998,000 units in 2012, 2,156,000 units in 2013 and 2,260,000 units in
2014), absent a material adverse change in our business or operating environment which would make the commitment non-economic. In the
event that such a material adverse change occurs, the UST Credit Agreement provides that we will use our commercially reasonable best
efforts to ensure that the volume of United States manufacturing is the minimum variance from the projected manufacturing level that is
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