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Majority of bondholders support reorganization



Published: Mon, June 1, 2009 @ 12:00 a.m.

DETROIT (AP) — More than 50 percent of General Motors Corp. bondholders said Sunday they would support a sweetened deal to swap the company’s $27 billion debt for stock in a restructured, leaner GM.

According to a statement from a group of ad hoc institutional bondholders, 54 percent of GM bondholders met a 5 p.m. Saturday deadline to exchange their unsecured bonds for a 10 percent stake in a newly restructured company and warrants to purchase a greater share of the new GM at a later date.

That agreement should make the automaker’s reorganization go more smoothly after it enters bankruptcy protection, as is expected Monday in New York. The move is seen as one of the critical last steps in GM’s path to enter bankruptcy protection and quickly exit a slimmer, more effective automaker. The company has been working through the weekend to make its final decisions on how to proceed with a court filing. It has a government-imposed June 1 deadline to finalize those plans.

Last week, bondholders resoundingly rejected an exchange offer that did not include warrants to purchase an additional 15 percent of the new GM.

The ad hoc committee, which said last week it would support the deal, made up 20 percent of the acceptance. The 15 percent of bondholders who accepted the original offer supported the new one, and “approximately 19 percent more indicated their support over the last few days,” said the group’s spokesman in an e-mail. He also said that “975 institutions either sent support letters or gave us indications of support.”

The company is surviving on nearly $20 billion in government aid and is poised to get $30 billion more as it reorganizes under court protection.

Although GM has not confirmed that it will file for bankruptcy protection, the company’s Chief Executive Officer Fritz Henderson will hold a news conference in New York Monday morning, and President Barack Obama is expected to give a speech addressing the Detroit automaker’s fate.

In exchange for a total of $50 billion in taxpayer aid, the government will take a 72.5 percent stake in GM.

It had been unclear whether the Treasury Department would view the bondholders’ acceptance as sufficient. In the previous bond exchange offer, the Treasury demanded that participation equate to 90 percent, or a debt exchange of $24 billion. But GM said Sunday evening that the Treasury has informed the automaker that it is “satisfied” with the level of bondholder support, allowing GM to proceed with the proposed separation of its good and bad assets under what the Obama administration hopes will be a speedy Chapter 11 reorganization.

The 54 percent acceptance represents only $14.6 billion, but GM would like to wipe all of its $27 billion in unsecured debt. By lining up bondholder support in advance of a bankruptcy protection filing, GM is likely to find it easier to persuade a judge to apply terms of the sweetened offer to all of its unsecured debt.

SEE ALSO:White House: GM to file today for bankruptcy and Valley leaders on edge, anticipating GM move today.


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