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How much money have we dumped into that company only to have it end up where many of us said it should have been allowed to go -- months ago?
http://www.bloomberg.com/apps/news?p...Rn8&refer=home
GM Said to Plan June 1 Bankruptcy as Debt Plan Gains (Update2)
By Jeff Green and Mike Ramsey
May 28 (Bloomberg) -- General Motors Corp., the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said.
GM’s path will be smoothed by an accord today giving some of its biggest bondholders an equity stake in the reorganized automaker. The U.S. Treasury is requiring that an unspecified percentage of debt holders accept the terms by 5 p.m. New York time on May 30, Detroit-based GM said in a regulatory filing.
“If bondholders agree to this up front, this would essentially be a prepackaged bankruptcy,” said S y Lombard, an analyst with New York-based bond-research firm Gimme Credit LLC. “GM could exit Chapter 11 faster.”
Battered by almost $88 billion in losses since 2004, GM fell short in a bid to cut debt by $44 billion under a U.S.-set June 1 deadline to restructure outside court. The 100-year-old automaker seeks to rebuild around assets such as the Cadillac and Chevrolet brands as it follows Chrysler LLC into bankruptcy.
The people familiar with GM’s plans didn’t specify where the automaker might make its Chapter 11 filing. They asked not to be identified because the details aren’t public.
Vice Chairman Bob Lutz, while not confirming GM’s intentions or a possible bankruptcy venue, said any court restructuring would be quick.
‘Pay It Back’
“We intend to get in and out very soon,” he said today at an Automotive Press Association luncheon in Detroit. “The U.S. government wants its money back, and our plan is to pay it back as quickly as possible. The U.S. government doesn’t want to own auto companies.”
The bankruptcy probably would last 60 to 90 days, said an Obama administration official who asked not to be identified because the talks are private. The Treasury will finance the trip through bankruptcy with about $50 billion, which includes $19.4 billion in current borrowing, GM said in a statement.
GM’s bankruptcy will be the third-biggest in U.S. history after Lehman Brothers Holdings Inc. and WorldCom Inc., based on GM’s reported global assets of $91 billion and total liabilities of $176.4 billion as of Dec. 31. Chrysler, which sought court protection on April 30, listed assets of $39 billion.
Going to court would end the suspense for GM, which said it expected to declare bankruptcy after failing to get enough support for a debt-for-equity exchange on $27.2 billion in unsecured bonds.
Sweetened Offer
Only 15 percent of bondholders approved the offer to trade their debt for a 10 percent stake in the new company, a person familiar with the matter said. GM sweetened the plan today to promise warrants good for buying 15 percent more of the new enterprise, which would have an improved balance sheet based on a U.S. plan to trade bailout loans for equity.
Another 20 percent of bondholders now support the swap, according to a statement from their ad hoc committee today.
Bondholders would lose some or all of the warrants and their 10 percent stake in the new GM en y unless the company wins sufficient support from those investors to satisfy the Treasury, GM said in the regulatory filing.
The government will make a “judgment call” on May 30 as to whether bondholder backing for the latest proposal is sufficient, the administration official said.
The accord with bondholders marks “another important step” in GM’s restructuring, another administration official said in Washington. President Barack Obama set the June 1 deadline after the government began propping up GM with emergency loans.
New Owners
The filing shows the U.S. Treasury owning 72.5 percent of equity in the new GM, a union health-care trust with 17.5 percent and 10 percent going to the old GM to hand to creditors in the bankruptcy process.
Creditors would have warrants to buy as much as 15 percent of the company through newly issued shares in two portions. The first 7.5 percent would become available when GM’s market value reaches $15 billion and the remainder at $30 billion, according to regulatory filings.
GM’s market capitalization last exceeded $30 billion in January 2004, according to Bloomberg data. The value at yesterday’s closing stock price was $702 million.
According to the filing, the debt at the new GM would consist of $8 billion in new Treasury loans, $2.5 billion owed to the United Auto Workers fund and $6.5 billion in dividend- paying preferred stock. The Treasury will get $2.5 billion in preferred shares that pay a 9 percent annual dividend, bringing the issuance to $9 billion in preferred stock.
Bonds, Shares
GM’s 8.375 percent bonds due in July 2033 rose 3.88 cents to 11 cents on the dollar as of 5:06 p.m. in New York, the highest closing price in seven weeks, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 96.8 percent.
The shares rose 15 cents, or 13 percent, to $1.30 at 4:09 p.m. in New York Stock Exchange composite trading. The stock has fallen 59 percent this year.
A portion of the debt financing for the new GM may be provided by the governments of Ontario and Canada, according to the filing. In that case, those governments would receive part of the preferred stock and common equity of the new company allocated for the Treasury.
GM wants to scrap the Pontiac line, sell its Hummer and Saturn units, and drop as many as 2,400 U.S. dealers by the end of 2010. Its Saab Automobile unit is in bankruptcy protection in Sweden, and the Opel division in Europe is up for sale.
Federal Recovery
The administration is optimistic about prospects for recovering taxpayer dollars being invested in GM’s restructuring, according to the official who discussed the timetable for the automaker’s stay in court.
The official didn’t know how much may be recovered and wasn’t certain about amounts invested during the George W. Bush administration. GM would be a private company for a time under the restructuring plan currently envisioned, the official said.
Chrysler may leave court protection as soon as next week under a plan to create a streamlined en y run by Italy’s Fiat SpA, based on the official’s prediction earlier this week that the automaker’s time in bankruptcy might be only about 30 days.
GM reached a tentative agreement with the UAW on May 21 to modify a 2007 labor contract and a day later arrived at a similar accord with the Canadian Auto Workers to keep alive operations in that country.
UAW members are voting this week on the contract changes and a plan to shrink GM’s obligation to a union-run trust fund for retirees’ medical expenses.
GM ceded the global auto sales crown last year to Toyota Motor Corp. and hasn’t posted an annual profit since 2004. GM’s U.S. sales have fell for 18 months in a row through April.
How much money have we dumped into that company only to have it end up where many of us said it should have been allowed to go -- months ago?
Can I has my money back from the non-fearmongering fearmongers plz??
Yup. Gotta love it. :p
$20 billion so far, but it will be $100 billion before it's all said and done. And no one should be buying any of that bull about getting paid back.
$20 billion so far. To put that in perspective, it works out to around $600k per GM employee.
On the business networks today (FBN & CNBC) I heard people saying they would need $16 - $18 billion more in taxpayer money following the bankruptcy just to keep them afloat while they try to become a compe ive company. Of course they'll be owned by the government at that point so I guess that won't be called bailout money.
"Capital contributions" from then on I guess, from the major stockholderOf course they'll be owned by the government at that point so I guess that won't be called bailout money.
dumping more money into a fail company, only to pay the clowns who are smart thats going to pull out when they get their share
And Toyota will still kick GM's ass, even with the full faith and credit of the American printing press behind it.
What does the cost to the taxpayers work out to for each UAW member's vote?
Government owning (in all senses of the word) General Motors. It's the Union/Government/Militant Environmentalist Alliance WET DREAM SONS!!!!!!!
Exactly my man. It is going to get ugly if people quit buying GM out of pure principle and ty downgraded vehicles.
The government will eventually have to FORCE people to buy their models directly or as they always do, indirectly. They will alienate Toyota etc in one form or another.
Obama is going to make sure the new GM utilitizes overpriced union labor to crank out fuel efficient cars, irregardless of the fact that American consumers don't want them. Then when the new GM continues to struggle financially we the taxpayers will either get to subsidize GM's ongoing business losses, or subsidize massive tax incentives to try and get people to buy the cars GM is making. Basically, GM is going to become the automotive equivalent of the Post Office.
cool.....i still use the post office.
and thanks Mr. President. you've done a damn good job, so far.
so it was bad for GM to go bankrupt a couple of months ago, but now it's "ok".
got it
bye bye, GM. nice knowing you.
i'm sure lawyers and salivating over this move.
timing is everything.
impressive, huh? i've been saving that one.
GM going bankrupt last October would have really tanked the economy. Now it's still bad news, but it's not going to cause a depression now.
As for unions, my understanding is that they have had to make quite a few concessions, and in bankruptcy, my understanding is that they'll have to start anew.
off. viva doesn't have time for rational thought.
then why was it not ok back then?
is this a slow day for you?
has our economy really gotten that much better since then? why we won't be plunged into a depression now that they're filing for bankruptcy?
um, Obama is in office now. Everything is better. He tells us so. Literally. Regardless of continued negative economic stats, we have escaped the brink by printing stimulus moneyz that hasn't hit the people yet.
Get with the clambake program good sir.
Government will subsidize failure, the "people" will pay for it in taxes, the debts will continue to grow anyways, and life will go on. Praise allah
There are more unemployed people now than there were last October. There are more homes in foreclosure now than there were last October. Consumer spending is slower now than it was last October. Yet somehow it's now OK for GM to go under, but it wasn't OK in October? Please explain.
Also, GM's influence on "the economy" is horribly overstated by politicians looking to justify the billions and billions of dollars being given away. GM, a DOW component, announces they're going bankrupt, their stock is down 30%, yet the DOW is up today. The economy wrote off GM a long time ago.
Lest we never forget to thank the Bush administration for starting all these government bailouts of everything. It's ironic that the GOP doesn't want Obama to break with the Bush model on torture, yet when he doesn't break with the Bush cycle on loans for GM...they fry his ass.
I say good riddance to GM. A ty car company making ty cars deserves to go down..the same for Chrysler. If I've said it once I've said 6000 times...American cars are garbage. Period.
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