Spiga

Kirk Kerkorian vs. Standard and Poors

Tracinda Corporation today announced that it intends to make a cash tender offer for up to 28,000,000 shares of common stock, par value $1 2/3 per share, of General Motors Corporation (GM) at a price of $31.00 per share. The offer price is without regard to General Motors' regular quarterly dividend of $.50 per share expected to be paid in June 2005.

Tracinda Corporation, of which Mr. Kirk Kerkorian is the sole shareholder, currently owns 22,000,000 shares of General Motors common stock, which represents approximately 3.89% of the outstanding shares. Tracinda's average cost for such shares is approximately $26.33 per share.

TODAY however; Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a significant blow that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers. The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages. The rating reductions are significant because some big bondholders such as some pension funds are prohibited from buying bonds that are considered by the major rating houses as speculative, or junk. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's investment grade spectrum. As a result of the new ratings, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.

GM's consolidated debt as of March 31 was $291.8 billion, while Ford's outstanding consolidated debt totaled $161.3 billion.
GM said it had $19.8 billion in cash at the end of the first quarter, and GMAC had $18.5 billion in cash and securities.

WILL THE DEBT CANNIBALIZE THE COMPANIES FASTER THAN MANAGEMENT CAN SELL OFF AND UNLEASH THE BOOK VALUE OF THESE COMPANIES. GM IS HOLDING ITS GAP UP, IF ITS FILLED (TO THE DOWNSIDE) KIRK MAY SEE THE FUTURE OF HIS INVESTMENT SOUR.

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