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Home | Blog | General Motors Avoiding Junk Pool

General Motors Avoiding Junk Pool

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01/25/2005

An interesting turn of events in the bond market. Fitch Ratings, desperate to be as recognized as the big boys — Moody's and Standard & Poor — is holding the line on GM bond ratings. The US automaker, with $45.5bn of corporate debt, has been teetering on junk bond status, as speculation has long been that S&P would force GM bonds out of investment-grade status.

The move by Fitch could keep GM in good standing in the Lehman Index, because Lehman announced it will now include Fitch in its index calculations, meaning two thumbs-up nods — from both Fitch and Moody's — is enough to keep GM's bonds afloat. One wonders about the usefulness and credibility of credit ratings heavily influenced by the desire for gainful alliances. It kind of reminds me of Beltway libertarianism.

Karen DeCoster, CPA, has an MA in economics and works in the healthcare industry. She has written for an assortment of publications and organizations, including LewRockwell.comMackinac Center for Public PolicyTaki's MagazineEuro Pacific Capital, and the Claire Boothe Luce Policy Institute. Her website is KarenDeCoster.com.

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