Bankruptcy Depends on Bondholders, G.M. Chief Says

New York Times ^ | May 11, 2009 | Nick Bunkley

[reaganaut1]

General Motors does not plan to sweeten its debt exchange offer to bondholders, even though its failure would probably push the company into bankruptcy, G.M.’s chief executive said Monday.

Bondholders who hold more than $27 billion in G.M. debt have until May 27 to decide whether they will swap their bonds for shares of a restructured G.M. The company has said it needs 90 percent of the bonds to be exchanged in order to meet Treasury Department guidelines to receive billions of dollars in additional loans. Analysts say that is unlikely to happen.

If not enough bondholders agree to the terms, G.M. is expected to file for bankruptcy protection by June 1.

“We don’t have any plan to make modifications at this point,” the chief executive, Fritz Henderson, said on a conference call. He added that the terms of the offer were dictated by Treasury officials, who told G.M. it could not give bondholders more than a 10 percent stake in the new company.

G.M. plans to give 89 percent of the company to the Treasury and to a new retiree health care fund for the United Automobile Workers union, 10 percent to bondholders and 1 percent to existing shareholders.

Mr. Henderson reiterated his previous assessment that bankruptcy was “probable” but he played down speculation that such an outcome was inevitable. He also said G.M. hoped to contain a bankruptcy to its United States operations but that a global bankruptcy is possible.

“There still the possibility and an opportunity for it to be done outside of a bankruptcy,” he said.

Mr. Henderson declined to comment on the status of talks with the U.A.W. or to respond to the union’s complaints that G.M. was shifting vehicle assembly work to factories outside the United States.

[reaganaut1]

"He added that the terms of the offer were dictated by Treasury officials, who told G.M. it could not give bondholders more than a 10 percent stake in the new company."

Obama and the UAW are planning to shaft GM bondholders in the same way as the Chrysler creditors. I hope some Republican politicians will protest this.

[Anti-Bubba182]

Bankruptcy Depends on Bondholders taking it in the .....

[dirtboy]

Hmmm ... take my secured bonds into bankruptcy court or trade them for common stock in a company that will be run by Obama and the UAW. This is a toughie...

[cynwoody]

I see GMW, GM's 7.25% $25 minibond, due in 2041, is now trading at $1.26, which means it yields 144% on cost until it doesn't. I wonder what it will be worth if this deal goes through.

[Anti-Bubba182]

Right! It was an outrageous idea that they would take ten percent and of bogus stock at that!

One thing certain, GM does not survive without continued Government loans. Nobody would loan them anything after this.

[scooby321]

American Companies won’t be able to float any bonds anymore and maybe Cities and States.

[Crawdad]

Are there NO honorable men left in Detroit?

[jerri]

No kidding! Then you have to hope for a fair (not liberal) judge.

[Vaduz]

GM said moving out of Detroit isn’t off the table looks good for China hope GM gets it act together.

[Nervous Tick]

>> The company has said it needs 90 percent of the bonds to be exchanged in order to meet Treasury Department guidelines to receive billions of dollars in additional loans. Analysts say that is unlikely to happen.

That’s because, unlike Bambi, Geithner, and the bloated greedy lazy UAW, the investors and funds that bought the bonds can think and work out math.

You’d have to be an idiot to value a union-led GM at 270 billion dollars, but that’s exactly what “Bambino the Munificent” expects bondholder to do.

[Navy Patriot]

Bankruptcy Depends on government intimidation of Bondholders