UPDATE:Majority Of GM Bondholders Back Debt-For-Equity Deal-Sources
31 Mai 2009 - 7:49PM
Dow Jones News
A majority of investors holding $27 billion in General Motors
Corp. (GM) bonds have agreed to forgive the debt for equity in the
new company, people familiar with the situation said, smoothing the
way for the auto maker as it prepares for a bankruptcy filing
expected Monday.
A battle with the group was one of the biggest hurdles biggest
hurdles GM faced in orchestrating a quick exit from Chapter 11.
A spokesman for the bond committee said approximately 54% of the
bondholders have indicated their support and that 975 institutions
either sent support letters or gave indications of support.
Of the supporters, 20% we on the ad hoc committee, 15% accepted
the initial tender offer and about 19% more indicated support over
the last few days following the sweetened deal.
The auto maker, living on U.S. government loans, faces a Monday
deadline imposed by the Obama administration.
There's little doubt GM is headed for bankruptcy, particularly
after the company announced Friday that Chief Executive Fritz
Henderson would give a press conference on Monday in New York
outlining proceedings that would likely take place.
Initially, the company said getting bondholders to agree to a
debt swap was its best chance for avoiding Chapter 11. But the
latest plan is designed to expedite a bankruptcy filling more than
to avoid it. As part of the agreement, bondholders pledged not to
oppose GM's reorganization in court.
Although the committee supported the deal, a group of dissident
bondholders represented by Thomas Lauria, a lawyer for holdouts in
the Chrysler case, fought against it. They argued small, individual
bondholders were left with no voice as the U.S. Treasury negotiated
directly with GM's large institutional bondholders.
Bondholders had until Saturday evening to voice support for a
new offer that would give them more than a 20% stake in GM - a 10%
share of the restructured company and warrants for another 15%.
It was up to Treasury, which brokered the deal, to determine
whether enough bondholders agreed for the offer to stand. A people
familiar with the talks said Treasury felt an adequite number had
signed off. This person said "more than 50% agreed."
The government sweetened the offer last week after bondholders
overwhelmingly rejected an earlier proposal that would have left
them with 10% equity in the new GM. Analysts' estimates have
bondholders coming out of the new deal with around 10 cents on the
dollar, compared to as little as nothing under the old offer.
An ad hoc committee representing major bondholders agreed to
support and encourage other big investors to back the deal.
Under the plan, the Treasury would provide GM with $30 billion
in loans to keep running through a bankruptcy, in addition to $20
billion already given to the company. GM won't have to repay the
loans, instead, the government will turn them into a controlling
stake in the company. The UAW would end up with at least a 17.5%
stake in the new company after agreeing to concessions that will
save GM about $10 billion in obligations to retiree health care as
well as billions more on labor costs. In exchange, GM agreed to use
a soon-to-be-determined idled plant to build a small car in the
U.S.
GM and the Obama administration, encouraged by Chrysler LLC's
progress in bankruptcy court over the last month, hope the company
could emerge in as little as 30 days. GM, however, could still face
challenges from hundreds of dealers its trying to shut down. The
company also is still negotiating with Delphi Corp. (DPH), its
bankrupt former parts arm.
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com