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Bondholders say no to GM plan
(China Daily)
Updated: 2009-05-28 08:10 DETROIT: General Motors yesterday prepared to face the fallout from a failed debt exchange that sends the largest US automaker closer to a bankruptcy filing expected by the end of the month. GM bondholders had until midnight to trade $27 billion in debt for a 10-percent ownership stake in the reorganized company that US officials have said could emerge from a quick trip through bankruptcy court. As the deadline passed there was no word from GM on how much debt the offer had succeeded in retiring. GM's bond exchange offer had been dogged by criticism since it was launched that it was an unfairly low payout made at the direction of US officials more sympathetic to the competing claims of GM's unionized workers and retirees. The exchange was also seen as GM's last remaining hope to cut debt outside the kind of government-financed bankruptcy underway for its rival Chrysler since the end of April.
GM would detail the results of the debt exchange offer on Wednesday morning, spokeswoman Renee Rashid-Merem said. The automaker's board could also meet as soon as Wednesday to review options for the automaker. The bondholder deal was running well short of the company's goal and had attracted only a low single-digit percentage of the $27 billion targeted as of Tuesday afternoon, nowhere near the 90 percent support that was GM's target to stave off bankruptcy, two sources familiar with the discussions told Reuters. Analysts said GM's bondholders tipped the company toward a near-certain bankruptcy that would be one of the most complex in US history. "I think the exchange offer was really a transparent attempt to blame bondholders for the bankruptcy rather than to accept responsibility for years of mismanagement and failure to anticipate things that should have been understood," said Richard Tilton, a restructuring analyst at Covenant Review. "I think the task force made that hurdle so high, they wanted them to go into bankruptcy, they see that as the solution," auto industry analyst Erich Merkle said on Tuesday. GM is widely expected to file for bankruptcy by June 1, the deadline set by President Barack Obama for the company to demonstrate its viability or face bankruptcy. "GM today stands at the very brink of bankruptcy," the United Auto Workers said in a document on Tuesday that detailed terms for the concession agreement now before members for votes this week. Any major changes in the ownership structure of a new GM appeared unlikely as the government is ready to increase its planned stake, and its risk, from 50 percent to as much as 70 percent to further cut the company's debt, the Wall Street Journal said on Tuesday. The government has provided a combined $36.6 billion to GM, bankrupt Chrysler and their financing units since December and said it is ready to finance a GM bankruptcy proceeding. The Journal reported that the Treasury was prepared to sink another $50 billion into GM through various financings. The key for GM's negotiations with the UAW was how the two restructured payment on $20 billion GM owes to a trust fund for retiree health care. The union has agreed to take 17.5 percent of common stock in a restructured GM. Reuters (China Daily 05/28/2009 page17) |
