GM General Motors Company

By Gautham Nagesh 

General Motors Co. has increased the capacity of its revolving credit lines by $2 billion, padding its liquidity position as it shifts substantial excess cash to shareholders, expansion and investments in future technology.

The company on Thursday said it has replaced a $12.5 billion facility with a pair of credit lines totaling $14.5 billion that will gradually expire between 2019 and 2021. Chief Financial Officer Chuck Stevens said the move gives the Detroit auto giant financial flexibility for "potential opportunities that may emerge to advance our strategic plan."

GM has been working to boost its presence in certain vehicle segments and markets, while also placing big bets on emerging business ventures. For instance, the company recently invested $500 million in ride-sharing firm Lyft Inc., while also acquiring Silicon Valley startups to help develop self-driving vehicles and other projects.

Under the new credit arrangement, GM will have available a $10.5 billion tranche that expires in five years and an additional $4 billion expiring in three years. The company's access to the credit lines could provide needed liquidity in a downturn in the economy or market collapse, such as the financial crisis leading to the auto maker's bankruptcy at the end of the last decade.

GM had a variety of liquidity options in 2008 and 2009, before its bankruptcy, but those facilities fell short of what the company ultimately needed. GM drastically cut its debt in bankruptcy court and its long-term obligations are lower than they have been historically.

Mr. Stevens said the revolving credit line, along with GM's target of $20 billion for cash on hand, should give the auto maker enough to hit its liquidity target, which is in the $30 billion-35 billion range. GM will also continue to fund its previously announced stock buybacks using available free cash flow.

S&P Global equity analyst Efraim Levy said companies look to extend their revolving credit lines when lender sentiment is good, since it is much harder and more costly to borrow when they actually need the money. "You want to do it when you don't need it," Mr. Levy said. "I would think of it as the flexibility to spend as they need to. It doesn't mean they will."

Mr. Levy also said the recent spate of deals in the autonomous-driving area could prompt more acquisitions and deals by auto makers, including GM.

Write to Gautham Nagesh at gautham.nagesh@wsj.com

(END) Dow Jones Newswires

May 26, 2016 18:20 ET (22:20 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.