UPDATE=GM Sets New Bondholder Deadline; Wins Initial Support
28 Mai 2009 - 6:40PM
Dow Jones News
DETROIT (Dow Jones)-General Motors Corp. (GM) won backing
Thursday from key creditors for a bankruptcy plan that would give
the U.S. government a 72.5% stake in a "New GM".
The new proposal outlined in a regulatory filing set a Saturday
deadline for bondholders to accept an offer sweetened with warrants
and additional federal backing.
With GM expected to file for court protection Monday, progress
in the U.S. came as parallel efforts to restructure its European
operations suffered a setback.
The German government criticized the negotiating stance of the
company and the U.S. government, and delayed a decision on
providing bridge loans to its Opel/Vauxhall units until Friday.
Under the proposal, the U.S. Treasury would loan GM at least $50
billion to fund the company through bankruptcy proceedings and
finance the entity that emerges from Chapter 11. The government
would be repaid through equity in the new GM
The United Auto Workers would receive 17.5% to fund a retiree
health care trust, with 10% going to creditors - in line with the
offer they rejected Tuesday - though warrants could substantially
increase that amount.
Bondholders, who soundly rejected an offer to swap $27.2 billion
in debt for 10% equity in the new company, would have rights to buy
an additional 15% of GM's stock at a lower price.
"The Ad Hoc Committee of GM bondholders supports the revised
offer from GM and believes that when contrasted with the
alternative - uncertain and costly bankruptcy court litigation -
that it represents the best alternative for bondholders in the
current difficult and dire situation," it said in a statement.
Bondholders have until 5 p.m. Saturday to decide whether to
accept the offer. The ad hoc committee representing institutional
investors had previously said it would oppose both the debt swap
and GM's bankruptcy plans to sell assets.
The group's support is critical in winning approval from the
larger number of GM bondholders, but far from guarantees
success.
A separate group representing small individual bondholders who
hold about 20% of the company's bond debt said Thursday the new
proposal doesn't look much better.
"From what many of our bondholders have heard, it's still a bad
offer because it only gives bondholders 10% of the company," said
Sarah Jackson, a spokeswoman for the Main Street Bondholders.
The Canadian federal government and the province of Ontario also
are both slated to receive some equity and preferred stock in
return for debt financing.
The filing didn't mention existing ordinary shareholders, who
are expected to be wiped out having been originally due to receive
1% in a 'New GM", though its shares recently rose 9.57% to
$1.26.
GM's U.S. workers are voting Thursday on contract amendments
that are also required, alongside creditor backing and a broader
viability plan, to meet the June 1 deadline set for securing extra
U.S. government support.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.
(Joshua Mitchell contributed to this report)