Tags: obama | gm | bankruptcy

Obama On Verge of Controlling Bankrupt GM – 'Government Motors'

Thursday, 28 May 2009 12:35 PM

Share:
A    A   |
   Email Us   |
   Print   |
   Forward Article  |
  Copy Shortlink

DETROIT – General Motors Corp. said Thursday a committee of bondholders has agreed to a sweetened deal proposed by the U.S. government to erase the automaker's unsecured debt in exchange for company stock.

A person familiar with the deal said that it is probable GM will file for bankruptcy protection. The person asked not to be identified by name because discussions are still under way with the U.S. and Canadian governments and there is a small chance that the company could avoid a Chapter 11 filing.

The company said in a statement that it offered bondholders 10 percent of the stock in a newly formed GM, with warrants to buy up to 15 percent if the bondholders agree to support selling the company's assets to a new company under bankruptcy court protection.

The company made the disclosure in a filing with the U.S. Securities and Exchange Commission.

The filing says if the bondholders don't agree to support the sale, then the amount of stock and warrants they get would be substantially reduced or eliminated.

Under the proposal, which has a deadline of 5 p.m. Saturday, GM would at some point enter bankruptcy protection and its good assets would be separated from bad ones.

The U.S. Treasury would get 72.5 percent of the new company's shares, while a United Auto Workers' retiree health care trust fund will get 17.5 percent and the old GM would get 10 percent.

The bondholders' stake would presumably be additional shares that would dilute the first batch issued by the new company. The UAW trust and others would get warrants for additional shares that would further dilute the stock.

A bondholders committee and other large debtholders agreed to the deal but still called it unfair. They collectively hold about 20 percent of GM's unsecured debt.

"While the committee continues to remain troubled by preferential treatment that the UAW VEBA is receiving compared to the bondholder class — rejecting this offer in the expectation that the bondholders will do better in a litigated outcome was a risk the committee is unwilling to take," the committee said in a statement.

The deal would wipe out GM's $27 billion in unsecured bond debt, converting to equity a total of $50 billion in company debt.

The person familiar with the GM plan said that if the deal goes through, the new GM would emerge with a total of $17 billion in debt — $8 billion owed to the U.S. government, $2.5 billion to the UAW trust and $6.5 billion in mainly overseas and capital lease debt.

It was unclear what would happen to the GM's current $6 billion worth of secured debt, but the person said the U.S. government will provide financing to operate the new company and for the old GM to be liquidated.

Trading of GM shares was halted for a short time Thursday morning, but resumed to rise 3 cents to $1.19 in midday trading.

An Obama administration official said the agreement is an important step in GM's restructuring and said the government's auto task force "will continue efforts to help ensure that GM emerges from restructuring as a strong, viable company that can operate independent of government support."

© 2014 Newsmax. All rights reserved.

Share:
   Email Us   |
   Print   |
   Forward Article  |
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Peter King, Press Corps Irked Over White House Boston Observance

Tuesday, 15 Apr 2014 22:16 PM

The White House press corps was unhappy that it was not allowed access to a moment of silence for Boston Marathon victim . . .

Dick Morris: US Must Keep Electoral College

Tuesday, 15 Apr 2014 14:46 PM

Democrats are plotting to rig the presidential voting system to ensure that liberals win future elections, veteran polit . . .

Rancher: If Feds Plan Raid or Lawsuits, 'We'll Take You On'

Tuesday, 15 Apr 2014 23:04 PM

Nevada rancher Cliven Bundy says he doesn't know much about possible plans by the federal government to either raid his  . . .

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved