Morgan Stanley and JPMorgan Chase & Co are likely to be the lead underwriters in General Motors' initial public offering, a source said on Friday, a role more attractive for its prestige than its fees.
Banks were competing fiercely to underwrite an offering that could be $10 billion to $20 billion, a person briefed on the matter said.
At that size, the deal would be the largest U.S. IPO since Visa Inc's (V.N) offering of $19.7 billion in March 2008, according to Thomson Reuters data, and one of the biggest U.S. offerings of all time.
The Treasury Department owns nearly 61 percent of the automaker's common shares after GM filed for bankruptcy last year. The automaker has since emerged from Chapter 11 protection and an IPO is a key step for GM to end its support from the government.
"The sooner they can get the government out of there the better," said Aaron Bragman, an analyst at research firm IHS Global Insight.
Analysts have estimated that the company could be worth more than $80 billion, which would leave taxpayers with a sizable paper profit.
The automaker's connection with the United States government has earned it the nickname "Government Motors" and cost it market share domestically among consumers who view it as a failed company, analysts say.
Morgan Stanley has been one of the government's key advisers in restructurings during the financial crisis. The bank advised the U.S. Treasury on Fannie Mae and Freddie Mac and is helping the government sell its remaining stake in Citigroup Inc (C.N).
The underwriting banks are expected to get about 0.75 percentage point of the deal in fees, the person briefed on the matter said.
That is relatively low. A typical fee for a smaller IPO is 7 percent, but multibillion-dollar deals usually carry fees closer to 3 or 3.5 percentage points, a banker said.
GM may also be looking for a line of credit, the person briefed in the matter said.
A banker said underwriters may be willing to accept lower-than-usual fees because taking a company such as GM public is seen as prestigious and underwriters hope to win future business from the automaker.
Morgan Stanley spokeswoman Mary Claire Delaney, GM spokesman Tom Wilkinson and JPMorgan spokesman Brian Marchiony declined to comment. A Treasury spokesman referred queries to the department's statement on Thursday.
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