GM Board Meeting Later This Week After Failed Debt Exchange
May 27 2009 - 10:01AM
Dow Jones News
General Motors Corp.'s (GM) board of directors will meet later
this week to decide the ailing auto maker's next move after
bondholders dashed its best hope of avoiding a bankruptcy
protection filing.
The company, possibly in its last days out of court, announced
Wednesday that the number of bondholders willing to exchange their
debt for stock was far below the 90% threshold GM needed to pull
off a restructuring outside of Chapter 11 protection.
GM won't repurchase any of the $27.2 billion of notes it sought
and will instead decide an alternative route as a Monday deadline
nears, the company said in a statement. A GM spokeswoman said she
is unaware of any plans to extend of revise the offer in an effort
to win over more bond holders. GM had sought to wipe out 90% of its
$27 billion obligation in exchange a 10% stake in a restructured
company, an offer that would have left bondholders with cents on
the dollar of what they're owed.
Bondholders, including tens of thousands of individuals and
institutions, rejected the offer as unfair relative to what the
company was offering other stakeholders, including the union and
the U.S. government.
Small and large bondholders waged an aggressive campaign to try
and get the U.S. Treasury - which dictated terms of the debt swap -
to budge.
Bondholders thought a new labor deal GM struck last week with
the United Auto Workers was a signal the company may sweeten its
deal because it gave the union less equity than initially proposed.
The deal could leave the U.S. owning as much as 70% of a
restructured GM.
But, as of Wednesday, the company didn't plan a new offer.
Meantime, around 60,000 UAW-represented GM workers are voting on
the labor deal Wednesday and Thursday after local union leaders
from around the country voted to approve the concessions on
Tuesday. GM, surviving on government loans, could file for
bankruptcy protection before a government-imposed Monday deadline
to reorganize itself into a viable company. GM hopes to rush
through bankruptcy court in as few as 30 days, but the drive for an
expedited bankruptcy could be challenged by GM's investors and
dealers.
GM and the United Auto Workers have agreed to a new
restructuring plan that slashes labor costs and relieves GM of
billion in obligations to retirees. The government's plan also
calls for paying off in full GM's secured lenders, including banks
such as Citigroup Inc. and J.P. Morgan Chase & Co., which are
owed about $6 billion. That would remove one potential obstacle to
a speedy bankruptcy reorganization.
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com
John Kell contributed to this report.