Global Automotive Technology :: A Complete B2B Portal for Automotive Industry | Best Media Portal for Automotive Industry | A Hub of Suppliers and Manufacturers for Automotive Sector

General Motors Corp. bondholders soundly rejected a debt-swap offer critical to the auto maker's survival, pushing the company closer to a bankruptcy filing that could come in the next few days.

GM's board of directors will meet later this week to decide the ailing company's next move after bondholders dashed its best hope of pulling off an out-of-court restructuring, the company said Wednesday.

 A GM spokeswoman said she is unaware of any plans to extend or revise the offer in an effort to win over more bondholders, as some had anticipated after GM cut a deal that gave its main union a far smaller stake in the company that initially proposed.

That smaller stake, along with a larger, controlling stake being given the U.S. government, could have left room to offer more equity to bondholders.

GM had offered to give bondholders 10% of the company in exchange for forgiving at least $24 billion of GM's $27 billion in unsecured debt. But the deal required the agreement of bondholders representing at least 90% of the debt, a threshold dictated by the U.S. Treasury.

The deal was a key element of GM's recovery plan along with deep concessions from the United Auto Workers union and a plan to shutter thousands of car dealers.

Without a bondholder agreement, GM will now likely turn to bankruptcy court. Chief Executive Frederick "Fritz" Henderson had said GM was almost certainly headed for Chapter 11 if the exchange failed.

Surviving on government loans as it burns through billions a month, GM was given until Monday by the Obama administration to restructure itself as a viable company or follow rival Chrysler LLC into bankruptcy court.

GM and Treasury officials, encouraged by Chrysler's progress in court over the past few weeks, believe that GM could emerge from bankruptcy in as little as 30 days.

But the drive for an expedited bankruptcy could be challenged by GM's investors and dealers. GM's offer of a 10% stake in the restructured company would have left bondholders with cents on the dollar of what they are owed.

GM won't repurchase any of the notes it sought and will instead decide an alternative route, the company said in a statement.

Many bondholders, including individuals and institutions, called the offer unfair relative to what the company was offering other stakeholders, including the union and the U.S. government. A group calling themselves the Main Street Bondholders lobbied on Capitol Hill, saying the plan would wipe out the savings of tens of thousands of individuals.

Some thought a labor deal GM struck last week with the UAW was a signal the company may sweeten its offer to bondholders because it gave the union less equity than initially proposed—17.5% of a reorganized GM rather than the 39% originally envisioned—in exchange for retiree health care concessions. The deal could leave the U.S. owning as much as 70% of GM.

GM's Mr. Henderson acknowledged at the outset of the bond-exchange offer that it would be a long shot, but said the company was prohibited by the Treasury from offering these investors a larger GM stake.

Comments

RSS

All rights reserved."