GM loses $24 million on derivatives

March 25, 1995|By Bloomberg Business News

DETROIT -- General Motors Corp. lost $24 million on a derivative trade that was terminated last year, the automaker disclosed in its newly released 1994 annual report.

The loss was on an interest-rate forward contract. GM officials in New York said that no foreign currencies or banks were involved, and that the loss will be amortized over 20 years, ending in 2013.

"That $24 million loss reflects the assignment of one swap from one bank to another," said Follin Smith, assistant treasurer in GM's New York office. "The swap was a fixed-to-floating-rate swap done to hedge a debt offering.

"It was not speculative like the ones that have gotten other companies or states in trouble," she said.

GM would only say that the swap was done in 1993 with a U.S. bank, which the top U.S. automaker declined to identify. The swap was done to free up some credit lines at the first bank.

GM made $8 million on a derivative trade in 1993. It declined to say if it expects any derivative losses this year and sought to minimize the 1994 loss.

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