GM Bondholders Committee Accepts Sweetened Deal; Chrysler-Style Bankruptcy Next
By Michelle Krebs May 28, 2009
By Michelle Krebs
DETROIT -- A committee of General Motors' bondholders, after soundly rejecting an earlier debt-for-equity swap by the automaker, has accepted a sweetened deal backed by the U.S. government that paves the way for a quick pre-packaged bankruptcy a la Chrysler's, CNBC reported.
GM, in a statement issued Thursday morning, said the U.S. Treasury had proposed incentives for GM's unsecured bondholders that would allow GM to pursue a pre-packaged bankruptcy under section 363 of the U.S. bankruptcy code.
"Implementation of this proposal would result in a new GM with a healthy balance sheet, putting the new company on a clear path toward long-term viability and success," the automaker said.
Opel Deal Hits Speed Bumps
In Germany, the sale of GM's Opel has hit some speed bumps. The bidders for GM's Opel has been narrowed to Italian automaker Fiat, which also could become the owner of Chrysler by week's end, and Canadian auto-parts supplier Magna International but overnight talks to put a final deal together and obtain government funding remain incomplete.
GM reportedly surprised government officials and Opel suitors by requiring an upfront payment of $415 million in short-term cash be part of the arrangement.
GM Europe head Carl-Peter Forster told a German magazine last week that Opel and GM Europe's Vauxhall operations in Britain had enough liquidity to last into the third quarter. The two companies are expected to report a combined loss this year of $3 billion, according to the Financial Times.
German ministers, emerging in the early hours of Thursday morning after more than 12 hours of talks, said they had been unable to reach a deal to provide Opel with temporary financing if GM files for bankruptcy, and put the blame for the failure squarely on GM and the U.S. Treasury, Reuters reports.
"We have made demands on the U.S. Treasury and expect answers by Friday, and we will need these answers in order to agree on a plan," Economy Minister Karl-Theodor zu Guttenberg told Reuters."We don't have the security yet that we need to commit to bridge financing today."
He added in an interview on ARD television as reported by Reuters that "the behavior of those responsible at General Motors, not only in Detroit but also in Europe, unfortunately, certainly leaves much to be desired."
European officials are continuing negotiations Thursday. Magna chairman Frank Stronach said his company was prepared to advance cash if the government could provide some guarantee for that sum.
Magna is seen by the favorite, particularly by Germany's powerful labor unions.
Two other bidders -- the Belgium-based RHJ International industrial holding company and China's Beijing Automotive Industry Corp. -- apparently are out of the running.
LEAVE A COMMENT