GM's ratings cut deeper into junk territory

Two major rating agencies cut General Motors Corp.'s debt rating deeper into junk territory after the automaker said it was offering banks collateral to renew a credit facility. Rating agencies had placed GM's debt on review for downgrade earlier because of concerns the automaker would have to offer collateral to bank lenders, leaving fewer assets for bondholders in the event of a bankruptcy.

GM, which lost $10.6 billion in 2005, is cutting 30,000 jobs and closing 12 plants as part of a broad restructuring effort. It is also offering early retirement incentives to more than 125,000 factory workers, including about 13,000 at its bankrupt former parts subsidiary, Delphi Corp.

Standard & Poor's cut GM's senior unsecured debt rating to "B-minus," the sixth-highest junk rating, from "B" and said it may cut the rating again. The bank loan was rated "B-plus," the fourth-highest junk rating. S&P also released a recovery report on GM concluding that unsecured bondholders would likely recover 56% of par in the event of a GM bankruptcy.

Moody's Investors Service slashed GM's senior unsecured rating to a deeply speculative "Caa1," seven steps below investment grade, from "B3." The outlook is negative, meaning the rating may be cut again over the next 12 to 18 months.

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