May 31, 2009 in City
GM board meets again as deadline nears
Bondholders’ support unclear, and sides mum
DETROIT – General Motors Corp.’s board of directors met for a second day Saturday to make the final decision on whether the automaker would complete its restructuring by filing for bankruptcy protection Monday.
The outcome of the meeting could not immediately be determined. GM and the Treasury Department, which has been guiding the Detroit automaker toward a rescue plan that will give taxpayers nearly a three-fourths stake in the company, went into secrecy mode.
GM’s bondholders had a 5 p.m. Saturday deadline to accept an offer to swap their $27 billion in debt for at least a 10 percent stake in a new GM. If the Treasury doesn’t get the amount of support it wants, bondholders could wind up with far less in bankruptcy court.
The Treasury Department had no immediate comment on the deadline passing, and GM spokesman Tom Wilkinson said the automaker did not plan to make any statements Saturday.
GM took a huge restructuring step Friday when the United Auto Workers union agreed to a cost-cutting deal, and early Saturday, Germany’s finance minister said a plan was approved for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of GM’s Opel unit.
But there was still much to do to beat the government’s Monday deadline to qualify for more aid. The company already has received about $20 billion in government loans and could get $30 billion more to make it through what is expected to be a 60- to 90-day reorganization in bankruptcy court.
GM has yet to confirm it will seek bankruptcy protection, but it has scheduled a news conference Monday.
The Treasury on Thursday offered bondholders 10 percent of a newly formed GM’s stock, plus warrants to buy 15 percent more to erase the debt. Last week, GM withdrew an offer of 10 percent equity after only 15 percent of the bondholders signed up.
It was unclear how many bondholders took the latest offer, although a group representing large creditors who hold 20 percent of debt agreed. If the 15 percent who took the first offer are added in, that would make 35 percent.
Elliott Management Corp., a $13 billion hedge fund and major GM bondholder, also said it had decided to accept the new deal. But spokesman Scott Tagliarino wouldn’t say how much GM bond debt Elliott represents.
Getting as many bondholders as possible to sign on to the offer in advance of a bankruptcy filing could help the automaker get through the court process more quickly, said Robert Gordon, head of the corporate restructuring and bankruptcy group at Clark Hill PLC in Detroit.
“The more consensus you have, the more likely it is you’ll be able to move through the bankruptcy process in an expeditious fashion with less resistance,” Gordon said.
In a typical Chapter 11 bankruptcy case, the company files a plan of reorganization that must be voted on by creditors. In each class of creditors, the plan would have to be approved by holders of two-thirds of the claims and a majority of the number of individual creditors who vote.
But it appears GM will sell some or all of its assets to a new entity that would become the new GM, rather than reorganize the old company.
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