THE EVENT: General Motors Corp. (GM) stepped up its
restructuring plan Monday, saying it will cut 21,000 hourly jobs
and eliminate its Pontiac brand by the end of next year. It will
also start an exchange offer for $27 billion of its unsecured
public notes that, based on Friday's stock close of $1.69. The
exchange offer is worth 38 cents on the dollar. That's higher than
the 8.5 to 12 cents GM bonds fetched in the secondary market, but
shareholders would be wiped out. The U.S. government would be the
majority owner in the auto maker in return for an extra $11.6
billion in federal aid. The exchange will commence only if 90% of
bondholders agree to the terms. Under the plan, if GM fails to get
adequate participation, it will file for bankruptcy protection.
WHAT IT MEANS: GM, which is surviving on federal loans, is
racing to restructure by June 1 under close watch of the Obama
administration. The bond-exchange filing represents an important
step in GM's effort to restructure its company, President Barack
Obama's automotive task force said in a statement.
MARKETS: GM shares jumped on the news. Shares were recently up
29% and were up as much as 34%. GM credit default swaps are
falling. It costs investors $8.1 million upfront plus a $500,000
annual fee, to protect $10 million of GM senior bonds for one year,
according to Phoenix Partners. That's against $8.4 million upfront
before the news.
Following are key stories:
.-UPDATE: GM To Cut 21,000 Hourly Jobs, Eliminate Pontiac
Brand
.-GM Launches Debt Exchange Valued At 38 Cents On Dollar
.-White House: GM Bond Exchange An 'Important Step'
.-GM CEO: 'I Am More Focused On Getting Results Rather Than
Being Big'
.-GM Canada Work Force To Drop To 4,400 In 2014 From 10,300 In
2008
.-GM: Will Continue Talks With Possible Opel Investors In
May
.-