GM Prepares for Bankruptcy
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Automaking giant GM is preparing for bankruptcy. Yesterday, the company received word that its bond holders rejected a plan to swap the debt for company shares. Additionally, the United Auto Workers union decided to reduce its stake in GM. CNBC reports on what has been going down, and what the next steps are:
There was a small hope Tuesday that GM could avoid a bankruptcy filing when the United Auto Workers union disclosed that it would take a 20 percent stake in GM — down from the original plan of 39 percent. That seemingly freed 19 percent of the Detroit-based company’s shares to sweeten the pot for its recalcitrant bondholders. …
Because the bondholder deal did not go through, the equity freed by the UAW deal now apparently will go to the U.S. government, which may have to commit billions more for GM’s restructuring in court.
The government’s stake in the company originally was to be 50 percent, according to GM’s regulatory filings. But it now could be as high as 69 percent. The Canadian government also could get equity for up to $8 billion in aid for the automaker.
While the board is meeting in the hopes of finding some other solution, there is not a lot of hope. The capital raised from the bond holder agreement was one of the last hopes. However, many bond holders will not be getting that much with a bankruptcy agreement, either. Rival Chrysler filed for bankruptcy next month. A GM bankruptcy, if it happens, will be the fourth largest in U.S. history. GM shares are down, trading at around $1.20 per share.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
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