GM Share Buyback a Credit Negative For Moody's

General Motors Co.'s announcement that it will buy back $5 billion of its own shares is a credit negative, Moody's Investors Service said Monday, although it kept its rating on the car giant and the outlook on the rating unchanged. "This program weakens GM's positioning at the current rating level and will likely delay any potential consideration for an upgrade," Moody's Senior Vice President Bruce Clark said in a statement. GM's ratings are important because its captive finance arm, GM Financial, is a major borrower. The key risk is GM's decision to fund the buyback by reducing the liquidity position of the automotive business by $5 billion, at a time when the company faces major financial challenges, said Moody's. The rating agency rates GM at Baa3, or one notch above junk status. The outlook on the rating is stable, meaning Moody's does not expect to change the rating in the near term. GM shares were up 2.8%, and have gained 14.5% in the last three months, while the S&P 500 has gained about 0.8%.