From Reuters:
General Motors Corp said on Thursday it had reached a deal with some major bondholders that would give them a bigger stake in a reorganized automaker and could pave the way for a fast-track bankruptcy backed by the U.S. Treasury within days.
The announcement was the clearest indication yet that GM, the No. 1 U.S. automaker, is close to filing for bankruptcy under the direction of the Obama administration. It would be the biggest-ever bankruptcy for a U.S. industrial company.
Under the proposed deal, which is supported by major institutional creditors holding about a fifth of its debt, bondholders representing $27 billion in debt would be offered 10 percent of a reorganized GM — the same stake they had been offered previously.
In a sweetener, bondholders would also receive warrants to acquire another 15 percent of the equity in the new company, provided they support a quick Treasury-backed sale process similar to one now being used for rival Chrysler.
Bondholders would have until 5 p.m. EDT on Saturday to indicate they would not oppose the sale process as planned, GM said. If bondholders do not provide those indications, common equity and warrants “would be substantially reduced or eliminated.”
…
The U.S. Treasury would own 72.5 percent of the new GM coming out of a bankruptcy sale process while a trust affiliated with the United Auto Workers union would own 17.5 percent, GM said in a filing with securities regulators.
Treasury is the largest lender to GM at this point.
GM, which has so far taken $19.4 billion in emergency U.S. government loans, was told by the Obama administration in late March that it had until June 1 to dig deeper and move faster for continued support. [Read More]
