GM Bondholders, Faced with Total Loss, Now Express Support for 10% Debt/Equity Swap Plan
According to a General Motors ("GM") regulatory filing filed this morning, an unofficial ad hoc committee of GM debt holders holding approximately 20% in aggregate principal amount of the notes expressed support for the debt/equity swap that would give bond holders 10% of the New GM- the same plan that the group uniformly rejected hours earlier. GM informed bondholders in the filing that unless they accept the US Treasury’s 363 Sale Proposal terms (i.e., Old GM sells to New GM substantially all its assets and New GM will assume certain liabilities from the Old GM) and bondholders waive its objections to asset sales in the bankruptcy process, bondholders would very likely lose all their principal. The new deadline to accept the US Treasury’s terms is 5:00pm EDT on Saturday, May 30.
Expected Capital Structure
The latest capital structure proposal breakdown envisioned includes:
·
· GM's Union-run Health Trust- 17.5%
· Creditors- 10% (including warrants, potential for 15% of the new GM)
· Equity- No mention in filing
Timeline
GM is expected to file for Chapter 11 bankruptcy protection on Sunday or Monday. In the interim, US employees are expected to vote today on contract amendments and the German government has delayed until tomorrow, Friday May 29, a decision on supporting a partial buyout of GM’s Opel/Vauxhall unit. A partial buyout of GM’s Opel/Vauxhall unit would effectively place it in a government sponsored trust to insulate Opel from the uncertainty created by a GM bankruptcy filing and designed to preserve the 25,000 German-based GM jobs (45% of GM’s total European labor force).
Market Reaction
GM shares are currently up 5% to $1.21 and its 7.20% 2011 Senior Unsecured notes are trading at 5.9 cents on the dollar.
Tags: GM
