Fitch rates GM convertibles B-

Fitch Ratings said it assigned a B- rating to General Motors Co.'s new series B mandatory convertible junior preferred stock, which is slated to be issued in conjunction with the initial public offering of the company's common stock.

The agency also affirmed the BB- issuer default ratings of GM and General Motors Holdings LLC and the latter's secured revolving credit facility at BB+.

The outlook is stable.

GM plans to issue $2.9 billion of the convertibles and to use the proceeds to repurchase shares of its series A preferred stock held by the U.S. Treasury as well as fund discretionary cash contributions to the company's U.S. defined-benefit pension plans. The new preferreds will automatically convert to common stock in 2013.

The agency the issuer default rating reflects the auto manufacturer's strong liquidity position, low leverage, improved cost structure and increasingly competitive product portfolio.

However, the company continues to face a number of challenges over the next several years including projected weak industry volume growth, underfunded pension obligations and continued cash needs tied to the restructuring of its European operations, the agency said.

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