With Chrysler already embroiled in bankruptcy, GM has been trying to avoid
the same fate. However, GM came one step closer to bankruptcy being a reality with the news this morning that its attempted debt-equity swap had failed to get the targeted amount of 90% of bondholders to swap their debt.
According to Bloomberg reports this morning, bankruptcy is now “imminent” for GM. Many analysts have also expressed no surprise that the debt-equity swap was a failure. The following is an excerpt from the Bloomberg report by Caroline Salas on the failed debt-equity swap transaction attempted by GM:
GM, propped up by $19.4 billion in emergency U.S. loans, will file for bankruptcy protection after failing to get 90 percent of bondholders to swap their debt, Chief Executive Officer Fritz Henderson has said. The exchange offer was opposed by both institutional and individual investors, who said they’ve been treated worse than a union retiree-medical fund.
“It’s no surprise at all that a deal that was as unattractive as this one would be soundly rejected,” said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. Bankruptcy is “imminent,” said Hastings, who urged his clients to refuse the exchange offer.
The decision on a bankruptcy is “up to the GM board to decide and that meeting is later in the week,” said Julie Gibson, a company spokeswoman. She declined to be more specific on the timing of the meeting.
In other GM news, the New York Times this morning said that the company once referred to by employees as “Generous Motors” may now be more aptly called “Government Motors” as GM’s expected bankrupty filing will give the U.S. Treasury Department a 70% in GM. Also, in the new restructuring plan agreed to by GM and the UAW, the union’s health-care trust would 17.5% of a reorganized GM.
According to Justin Hyde of the Detroit Free Press, GM and the UAW have also agreed to keep open two U.S. plants that had been previously designation to be closed.
Tags: auto industry news, debt equity swap, general motors, gm bankruptcy, health care trust, u s treasury department