What do GM bondholders get (Detroit Free Press, Bloomberg)

Bondholders of old GM to get shares in new GM shortly

BY CHRISSIE THOMPSON

DETROIT FREE PRESS BUSINESS WRITER

Apr 6, 2011|

General Motors' pre-bankruptcy
bondholders, who have waited more than
four months to share in the automaker's
return to the stock market, will receive
shares in the new GM on or around April
21, according to a bank representing
them.

After GM exited Chapter 11 in July 2009 as
a new company, its cast-off assets
remained in bankruptcy, waiting to be sold.
Bankruptcy Court Judge Robert Gerber
signed a plan last week that Motors
Liquidation -- the name for the unwanted
assets -- will use to liquidate this year.

As part of that plan, bondholders in the old
company will trade their bonds for stock in
the new company and warrants to buy
more shares. That stock and warrants
should arrive in bondholders' brokerage
accounts "on or about April 21," according
to a statement on the Web site of
Wilmington Trust, a bank representing
bondholders.

The bonds will be put in a pool with about
$36.4-billion worth of unsecured claims,
CRT Capital analyst Kirk Ludtke said in a
research note last week. About 10% of
GM's 1.5 billion common shares -- which
closed at $32.87 Tuesday afternoon -- will
be issued to bondholders proportionately
to the value of their bonds.

Those investors will also receive warrants
to buy another 15% of GM's stock by either
2016 or 2019. Bondholders will purchase
that extra stock by paying either $10 or
$18.33 per share.

The initial payment of stock and warrants
will be about 70% of what each bondholder
will eventually receive. The rest will be paid
out as the last claims against old GM are
paid, with most of the remainder to arrive
within three or four months. The rest could
trickle in over a year or longer.

Bondholders with questions may contact
Wilmington Trust at 866-521-0079 or
mlcguctrust@wilmingtontrust.com.

Contact Chrissie Thompson: 313-222-
8784 or cthompson@freepress.com

--------------------------------------------------

Old GM Bondholders Getting Shares in New GM May Depress Price
April 07, 2011, 12:04 AM EDT
By David Welch

April 7 (Bloomberg) -- Investors holding bonds in the old General Motors Corp. will receive stock and warrants for shares in the new General Motors Co. on April 21, an action that analysts said may depress the stock price.

Old GM, now known as Motors Liquidation Co., will give bondholders 150 million shares in GM and warrants to buy 272.8 million more shares. A trust holding the shares will distribute them directly to bondholders’ brokerage accounts on or after April 21, according to a memo distributed Wilmington Trust Inc., a money-management firm hired by the creditors’ committee.

Some of the bondholders are retail investors who may sell the shares and briefly sink GM’s stock price, said David Whiston, an analyst with Chicago-based Morningstar Inc. Investors have probably priced in the dilution, so it won’t change GM’s long-term value, he said. He has not changed his $48 a share valuation based on the release of shares to bondholders.

“I would think that there will be more selling than holding,” Whiston said. “Any sell-off in GM is a buying opportunity. Long term, I think the company is positioned very well.”

Bondholders were promised stock and warrants in the new GM to make up for some of their loss during the predecessor company’s government-backed bankruptcy. The warrants given to bondholders for new GM stock are already in the money, according to a report by Kirk Ludtke, senior vice president of CRT Capital Group, a money management firm in Stamford, Connecticut.

Warrant Release

When U.S. Bankruptcy Court releases the warrants and stock through a trust, bondholders will collectively get 136.4 million warrants for one share each at $10 a share and an equal amount at $18.33 a share, said Wilmington Trust, which is based in Wilmington, Delaware.

Owners of old GM bonds must notify Wilmington Trust by April 15 to get stock and warrants on April 21. If they notify Wilmington later, the bondholders will get their shares and warrants at a later date.

Currently, Motors Liquidation has about $30 billion in claims allowed by bankruptcy court, of which about $29 billion are from the bondholders, said a person familiar with the matter.

There may be as much as $8.8 billion in additional claims that could be allowed by the court, Ludtke said in the report.

If the approved unsecured claims exceed $35 billion, GM would have to issue up to 30 million shares, Jim Cain, a company spokesman, said in an interview. GM doesn’t expect claims to reach that amount, the company said in a regulatory filing.

The bonds issued by General Motors Corp. should recover about 30 cents on the dollar when the shares are distributed later this month, Ludtke said in a telephone interview. He expects GM’s share price to rise to $40, which implies a recovery rate of about 40 cents on the dollar, Ludtke said.

GM shares were unchanged at $32.87 yesterday in New York Stock Exchange Composite trading, down from a high of $38.98 on Jan. 7. The shares were priced at $33 for the initial public offering in November.

--Editors: Jamie Butters, Kevin Orland.

To contact the reporter on this story: David Welch in Southfield, Michigan, at dwelch12@bloomberg.net.

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net.

What the GM bondholders get from the IPO (Detroit Free Press)

Posted: Nov. 15, 2010
In GM IPO, stakeholders could walk away with billions as stock hits the market this week

Some will see billions as stock is released to public this week
By CHRISSIE THOMPSON
FREE PRESS BUSINESS WRITER

This week, General Motors' stakeholders will see some cash. Finally.
If all goes as planned, GM will price its initial public stock offering on Wednesday, and the stock will hit the market on Thursday morning with new owners.

As trading begins, owners such as the U.S. Treasury will walk away with billions of dollars in exchange for releasing their GM stock to the public.

But that doesn't include GM bondholders -- many of whom are Detroiters who supported the home team years ago through their investment portfolio.

During GM's bankruptcy last year, the bondholders were given a 10% stake in the new GM. But they won't actually receive the shares until the liquidation of the cast-off portion of the old GM that is still in bankruptcy. That's expected to take three to six months, according to an insider from a firm that's a major bondholder.

Until then, GM's bonds will continue to trade. And starting this week, so will the stock -- with everyday Joes like Kris Trexler eager to get a piece from the stock's first public owners.

Trexler, a Los Angeles film and video editor, said he cried when he turned in the EV1 electric car that GM canceled a decade ago. He's now one of the consumer advisers testing a Chevrolet Volt for three months -- and he already has a Volt on order for when the test ends.

"After driving this car ... I can't think of any reason I wouldn't buy some stock," Trexler said. "This company is back, and they've proved it to me."

Old GM bonds guarantee shares of new GM stock

"I've been holding them for years. What's another couple of months?"

That's the strategy Northville's Frank Drew says he's using for his General Motors bonds. The bonds, with a face value of about $150,000, are now trading at about a third of their original value. But once the part of the old GM still in bankruptcy is liquidated, Drew will get GM stock. His bonds will be put in a pool with about $37 billion worth of bonds and other unsecured claims, and 10% of GM's 1.5billion common shares will be issued to bondholders proportionately to the value of their bonds.That stock will be Drew's to do with as he wishes -- just as it will be for the buyers of GM's stock when it hits the market Thursday, 16 months after the company exited Chapter 11 bankruptcy.

GM is planning to sell up to 419.75 million common shares and 69 million Series B preferred shares to hedge funds, money managers and long-term investment firms. Those firms will then trade the stock on the New York and Toronto stock exchanges.

The automaker set a target range for the common shares at $26 to $29 each, but GM is expected to raise that range early this week by no more than a few dollars, according to two sources familiar with the situation. As executives finish their road show presentations to investors in North America and Europe, they're gauging the interest of the all-important long-term investment firms. GM needs those firms to hold stock for months, or even years, to keep it stable.

By all accounts, demand for GM stock is strong, likely enough for every possible share to sell. And the recent market improvements only help. The Dow Jones Industrial Average has gained about 500 points in the last month, and more than 1,000 in the last two months, closing Friday at 11,283.

Probable buyers include GM's Chinese automaker partner SAIC and investment funds from the Middle East.

That could create controversy for the IPO's largest seller, the U.S. Treasury, which is planning to use the sale to lower its stake in GM from 60.8% to slightly more than 40%. The treasury has said that some foreign investors would be allowed, but consumer advocate and former presidential candidate Ralph Nader cosigned a letter last week to President Barack Obama, urging him to suspend the IPO, partially because of the need to keep investment in the U.S.

Nader was also concerned that the government plans to sell part of its stake at a loss. The government needs to average $43.67 per share to break even on its $50-billion investment in GM, above the likely range. The treasury is hoping GM's stock will grow in value over the coming months and years so it can make more money when it sells the rest of its shares.

An increase in stock price is likely, said a person from a firm that owns a large number of GM bonds. The firm expects GM's stock to quickly reach the mid-$30 range the bond trading currently implies. And by 2013 or 2014, the person said, the firm expects the stock to hit $60 to $70 each, as long as GM fulfills executives' predictions that the company will make $11 billion to $13 billion annually before interest and taxes in an average sales climate.

GM bondholders will also receive warrants to buy more stock by either 2016 or 2019. Bondholders will be able to receive that extra stock by paying either $10 or $18.33 per share, which will count as revenue for GM. The warrants will take bondholders' total share in GM to 23.85%.Contact Chrissie Thompson: 313-222-8784 or cthompson@freepress.com

When is the GM IPO? After the Election (WSJ)

Official White House Briefing: "Fact Sheet on Obama Administration Restructuring of General Motors"

Treasury Provides Further Guidance on GM IPO

AUTOS SEPTEMBER 21, 2010

China's SAIC Expresses Interest in Buying GM Stake


By SHARON TERLEP
DETROIT—Interest by China's biggest auto maker in possibly buying a stake in General Motors Co. this fall raises the dicey issue for the U.S. government over foreign investment in the Detroit company.

SAIC Motor Corp., which has built cars with GM in China since the 1990s, hasn't decided whether to participate in GM's initial public offering but has expressed an interest in doing so, people familiar with the matter said.

GM declined to comment about SAIC. The Chinese auto maker said only that it is closely watching the GM offering. SAIC's interest was first reported by Reuters news service.

The issue of foreign investors buying GM shares in the company's IPO is a thorny one for the U.S. government, which is eager to unload its 61% stake in the auto maker.

The Treasury is likely to seek out large institutional investors to buy blocks of GM stock at a set price. Such "cornerstone" investors typically commit to holding their stock as a show of confidence, which can help draw other investors. In exchange, cornerstone investors sometimes get a favorable deal on the shares. Several U.S. investors have expressed an interest in buying a stake in GM, including potential cornerstone investors, according to a person familiar with the situation.

The larger the group of cornerstone investors, the easier it would be for the Treasury to sell a big chunk of its GM stake in the IPO. GM and the banks underwriting the deal are pushing for the biggest possible investor pool to increase the size of the offering. The IPO will likely involve shares held by the Treasury, a union-managed retiree trust fund and Canadian governments.

But the Treasury also is worried about the political reaction if non-U.S. investors, such as sovereign-wealth funds or a Chinese company, are allowed to acquire a significant stake in GM after U.S. taxpayers spent $50 billion to assist the company through bankruptcy reorganization.

"Critics will publicly blast the Obama administration for using taxpayer money to fund foreign ownership in an American icon," said Morningstar automotive equities analyst David Whiston. Yet restricting foreigners from buying stock in the IPO would be impractical since the shares would be available on the public market, he said.

Indeed, the Treasury, in an effort to maximize the share price and establish a solid shareholder base, said last week that all investors will have access to GM shares. The statement also said, however, that no single investor or group of investors would receive "a disproportionate share or unusual treatment."

GM plans to begin pitching the IPO to investors immediately after the Nov. 2 midterm elections, which could keep the IPO separate from campaign politics. The goal is to conduct the offering before the end of the month. GM Chief Executive Dan Akerson said last week that it will likely take years for the U.S. government to unload its entire stake.

Mr. Akerson, who took over as CEO Sept. 1, has been more pragmatic about the IPO than was his predecessor Edward E. Whitacre Jr., who pushed the Treasury to unload as many shares as possible as quickly as possible. In contrast, Mr. Akerson last week acknowledged the importance of Treasury getting the best possible share price, even if means the government continues to hold some shares for some time.

China's auto market, the world's biggest, is a key source of strength for GM.

The auto maker's sales in China rose 19% in August from a year earlier while the U.S. and European markets struggled. The auto maker's partnership with SAIC has been central to GM's success in China and is expected to continue to play a major role.

Such joint ventures also are an important platform to reaching other fast-growing, emerging markets. GM and SAIC are teaming to expand in India, for example.

Write to Sharon Terlep at sharon.terlep@wsj.com

The GM IPO (Businessweek, Reuters, Barrons)

Barron's Cover | SATURDAY, AUGUST 21, 2010
Who's Driving?
By ANDREW BARY

Speculation on the new GM: IPO Price, What old GM Bondholders Might Get

"....The way for investors to play the new General Motors is through the debt of the old GM. Valuing that $27 billion (face amount) of debt isn't simple because the bonds are entitled to 50 million GM shares and two issues of warrants to buy more. The warrants, each involving 45.5 million shares, have strike prices of $30 and $55 and aren't easy to value. And there's an additional wrinkle: Bondholders aren't the only creditors entitled to the stock and warrants. There may be at least $37 billion of total claims allowed by the bankruptcy court, GM said in its IPO prospectus. This means that the stock and warrants will be apportioned to a larger group of creditors than just bondholders...."



GM plans to file for IPO during week of August 16: sources
Fri, Jul 23 2010
By Clare Baldwin and Soyoung Kim

NEW YORK/DETROIT (Reuters) - General Motors Co plans to file its registration for an initial public offering during the week of August 16, just after the expected date for its second quarter results, according to two people with direct knowledge of the preparations.

A GM filing with the U.S. Securities and Exchange Commission would be the first step toward an IPO to reduce the U.S. government's ownership in the automaker after a $50 billion bailout in 2009.
By filing with the SEC in August, GM is aiming to complete its IPO before the November U.S. elections, according to the sources, who asked not to be named because the closed-door preparations remain confidential.

GM also remains in talks with Bank of America Corp , JPMorgan Chase & Co , and Wells Fargo & Co for dealer and consumer financing for more credit-worthy borrowers, one of the sources said.

One concern for potential investors has been whether GM dealers and potential car buyers have the same kind of access to financing as competitors with in-house financing operations like Ford Motor Co .

General Motors on Thursday said it would buy auto finance company AmeriCredit Corp for $3.5 billion in cash to form what it called the "core" of a captive finance operation. The move marks a reversal of the position GM took when it sold control of its former in-house financing arm GMAC in 2006.

Any additional financing partnership agreement GM reaches would be complementary to the AmeriCredit transaction, one of the sources said. Many GM dealers have complained that lack of consumer financing has cost them sales.

An IPO for the U.S. automaker, which was restructured in bankruptcy last year, would be the biggest U.S. stock offering since Visa Inc's $19.7 billion March 2008 IPO and one of the biggest IPOs of all time.

GM's second-quarter earnings report is expected to show the automaker generated cash for a second consecutive earnings period, according to one of the sources.

GM Chief Financial Officer Chris Liddell told CNBC on Thursday that the automaker would report results in about three weeks.

GM spokeswoman Renee Rashid-Merem told Reuters on Thursday the automaker would report second quarter results in mid-August.

"Beyond that, we aren't commenting on matters relating to an IPO. We will launch an IPO when the conditions are right and the company is ready," she said.

U.S. officials have said repeatedly that GM's board of directors have a free hand to run the company to try to improve the return for taxpayers.

The automaker posted its first quarterly profit since 2007 in the first quarter. In the June-ended quarter, industry-wide U.S. auto sales were above 11 million vehicles on an annualized and adjusted basis.

But GM's lower cost structure coming out of bankruptcy has allowed the automaker to break even with industry-wide U.S. sales as low as about 10.5 million vehicles, the sources said.

UAW, CANADA SALES PROPORTIONAL

GM's biggest shareholder is the U.S. Treasury, which owns nearly 61 percent of the automaker. The Treasury is expected to sell between 20 and 24 percent of its stake, sources said earlier this month.

The United Auto Workers healthcare trust, which owns 17.5 percent of GM, and the governments of Canada and Ontario, which own 11.7 percent, are expected to sell the same share of their holdings as the U.S. government, one of the sources said on Thursday.

GM, which is not expected to pay dividends on its newly-issued common stock, also plans to sell $3 billion worth of mandatory convertible securities, a source said earlier this month.

The U.S. automaker also is in the process of finalizing a $5 billion revolving credit line, several sources have said.

(Reporting by Clare Baldwin in New York and Soyoung Kim in Detroit, additional reporting by Kevin Krolicki in Detroit; editing by Carol Bishopric





Politics & Policy July 15, 2010, 5:00PM EST
GM's IPO May Require Hefty Incentives
The sales pitch will need hope, contrition, and smooth talking

By Roben Farzad, David Welch and Jeff Green

The initial public offering of recently bankrupt and nationalized General Motors looks to be one of the trickiest deals in memory.

True, the still-enormous carmaker has shed billions in liabilities and legacy costs in its "quick-rinse" 39-day bankruptcy. After a federal rescue, GM is again profitable, and its vehicles are selling briskly in the U.S. and China. Yes, the Treasury Dept., which extended close to $50 billion of aid to the behemoth last year, is a motivated seller, eager to prove the bailout a success in an election year in which many voters say bailouts wasted their money. "The initial public offering will be a significant step in carrying out Treasury's previously announced intention of disposing of TARP investments as soon as practicable," states a Treasury memo on the deal, not yet scheduled but widely expected before the November elections.

The Wall Street underwriters, likely to be Morgan Stanley (MS) and JPMorgan Chase (JPM), are so keen to participate that they are accepting a 75 percent discount on their fees, says one person briefed on the matter. Various estimates peg the flotation, including about 20 percent of the government's 61 percent stake, at $12 billion, which would make it the second-largest in a decade, after Visa's (V) $19.7 billion deal in 2008. And do not underestimate GM Chief Executive Ed Whitacre's resolve. "The new management team desperately wants to feel like a legitimate company again," says Steve Dyer of Craig-Hallum Capital Group, a Minneapolis-based trading and research shop. "That can only happen if they get rid of the perception that they're still reliant on the government."

All great, save for one thing: It's not clear that investors are pining to buy GM 2.0. This could be an IPO unlike any other, and not only because Uncle Sam is hawking the shares. The main selling point will not be a quick return on investment. Instead, it will be that GM's limited record of success—the company just reported its first quarterly profit since 2007—is only the beginning. Throw in contrition and appeals to hope and patriotism, and GM just might have a successful offering.

Job No. 1 is restoring "Government Motors" to a staple investment for institutional shareholders. That means convincing investors it can consistently make a profit in a leaner car-selling market. There's no getting around the reality, though, that GM has a ways to go before it wins over the car-buying public. In an April Consumer Reports study of reliability among 15 automakers, GM scored second to last. GM has shed the Hummer, Pontiac, Saab, and Saturn brands and now consists of Buick, Cadillac, Chevrolet, and GMC.

Then there's the let-bygones-be-bygones part of the IPO sales pitch: GM must persuade investors burned by the government takeover and unconventional bankruptcy to buy its shares again. That might require mediation by the U.N. after a bankruptcy proceeding in which the United Auto Workers union received more of the newly issued stock than some bondholders—a rearranging of the stakeholder pecking order that would not have happened in a traditional court-managed filing. "GM and Treasury will pay a price for that," says Maryann Keller, a veteran auto industry analyst who advises large investors. "Three words," says William Smith of New York-based Smith Asset Management, a former holder of GM's old shares: "Smoke and mirrors." He calls the preference given to the UAW in the bankruptcy "dirty pool," something "unprecedented in a democratic country with bankruptcy rules."
Even after its restructuring, GM has a troubling pension burden. Its retirement plan is underfunded by $26.8 billion. While the company doesn't have to make a payment for three years, at some point more money will have to go into the plan.

There are other questions: The reception for GM's much anticipated all-electric Volt, which the company says it will roll out at the end of next year, is uncertain. So is GM's plan to fix its European operations, which lost $506 million in the first quarter. Another unknown is what kind of auto market GM needs to stay in the black. The sales levels of 16 million to 17 million cars a year that once prevailed? Or the present 11 million?

Keller argues that demand has been reset downward because of lagging personal income, fading consumer confidence, and the end of easy credit. Detroit, she notes, has spent the past four decades extending the typical car loan from two years to five or six, to reduce monthly payments and get more units out the door. Now, she says, "we're really at the limit of what you can do with creative auto financing." GM's lack of a dedicated finance arm could also be a problem. "GM will launch an IPO when the conditions are right and the company is ready," says spokeswoman Nina Price, declining further comment.

Perhaps the strongest case for a resurrected GM stock is that many fund managers will have no choice. What was too big to fail a year ago remains too big to ignore in current investing terms. Ford (F), which is the only other remnant of the Big Three available to investors, is the 53rd-largest component in the Standard & Poor's 500-stock index, according to Bloomberg data. GM, which is now probably worth more than Ford's $40 billion valuation, would almost certainly be restored to the S&P 500, the preferred benchmark for mutual funds. "Most fund managers need and want exposure to the space," says Craig-Hallum's Dyer.

The underwriters have a tricky assignment: Unless the stock market ultimately values the 102-year-old automaker at a truly impressive $80 billion, taxpayers will not break even. With confidence flagging in the overall economic rebound and the auto industry's wobbliness in recent months, "the risk remains high that an IPO in this environment is unlikely to generate the best returns for the taxpayers," writes Bill Visnic, a senior editor at Edmunds' AutoObserver.com. As any good dealer will admit, you need heavy incentives and smooth talking to move a rebuilt car off the lot.

The bottom line: Despite a shaky economy, the White House is eager to refloat General Motors after its government takeover and bankruptcy.

Bloomberg Businessweek Senior Writer Farzad covers Wall Street and international finance. Welch is Bloomberg Businessweek's Detroit bureau chief. Green is a reporter for Bloomberg News .

When is the GM IPO? (Wall St Journal)

The Big Guns Coming Out for GM Deal

By RANDALL SMITH And SHARON TERLEP

Wall Street bankers are salivating over one of their biggest potential paydays since the market meltdown of 2008: the planned initial public offering of General Motors Co.

With a size that may top $10 billion, the GM IPO could generate fees of $275 million or more for the Wall Street underwriters, the most fees from a single stock deal since the $19.7 billion IPO of credit-card giant Visa in March 2008 generated $550 million.

Some Wall Street bankers said they expect the GM initial public offering will be led by just two firms, who would typically command the lion's share of the fees.Above, GM's world headquarters in Detroit.
All of which explains why top officials of several major financial giants personally participated in what is known on Wall Street as a "bake-off," a series of meetings in which the bankers present their best ideas for how to sell the stock.

James Dimon of J.P. Morgan Chase & Co., John Mack of Morgan Stanley and Brian Moynihan of Bank of America Corp. all personally took part in the meetings with officials of both GM and the U.S. Treasury Department, which acquired its current 61% stake in a $50 billion bailout last year.

Vikram Pandit of Citigroup Inc., who was visiting Citi offices in Mexico, took part by phone. Although Lloyd Blankfein of Goldman Sachs Group was in London, Goldman's president, Gary Cohn, attended, along with David Solomon, the firm's co-head of investment banking.

Other firms sent some of their best-known personalities as well. For example, Mr. Dimon attended with James B. Lee, the well-known top deal maker at J.P. Morgan. The Citi delegation also included John Havens, head of Citi's institutional-clients group, and Tyler Dickson, the firm's head of global capital-markets origination. The bake-off meetings were previously reported by Fox Business.

Before the bake-off pitches, the Wall Street firms were sent questionnaires asking how they have supported GM in the past, according to one person told of the meetings.

Some Wall Street bankers said they expect the GM deal will be led by just two firms, who would typically command the lion's share of the fees. Firms with armies of retail brokers such as Morgan Stanley and Bank of America, which has brokers from Merrill Lynch, could have an advantage. Another firm with an edge is J.P. Morgan, which has been the biggest lender to the auto industry over the past decade, one person said.

Although the value of GM's former common stock was vaporized in its visit to bankruptcy court last year, the No. 1 U.S. auto maker by sales has been able to slash its debt from $45.9 billion at the end of 2008 to less than $10 billion currently.

It isn't clear yet to what extent GM's other shareholders will sell stock in the offering. They include a union trust for retired auto workers, which holds 18%, the Canadian government, which owns 12%, and former debt holders who own 10%.Some Wall Street analysts estimate GM's market value could top that of Ford at $41 billion and even exceed $70 billion, the level needed for the U.S. government to break even on its investment. That would top GM's peak market value of $60 billion in 1999, when both the stock market and sales of high-profit sport-utility vehicles were booming. Two months ago, J.P. Morgan Chase debt analyst Eric Selle put GM's stock-market value at $90 billion. By comparison, the market value of Toyota is $116 billion.

The Obama administration has said it is hopeful GM can make an offering by the end of this year and is eager to shed its stake in the company, though the auto maker and the Treasury have stressed that the timing is up to GM.

The company doesn't want to rush the offering and would prefer to address some issues—namely its lack of a company-run finance arm and losses in Europe, the site of clashes with labor and state governments over layoff plans—said people with direct knowledge of the company's strategy.

The IPO pickings have been slim for Wall Street ever since the Visa deal. After peaking at $55.3 billion in 2007, the volume of U.S. IPOs tumbled 70% to $16.7 billion last year, Dealogic said. The biggest U.S. IPO since Visa was just $2.2 billion, Verisk Analytics from last October.

The U.S. Treasury recently chose Lazard Ltd. to advise on the IPO. Among those playing a lead role in the underwriter selection are the Treasury's "car czar," Ron Bloom, himself a Lazard banker in the 1980s, and GM Chief Financial Officer Chris Liddell, an alumnus of software giant Microsoft Corp.

In its most recent financial report, GM showed a profit of $863 million in the first quarter of 2010, compared with a $6 billion loss a year earlier, marking the auto maker's first profitable quarter since 2007. Revenue grew 40% to $31.5 billion, and the company generated $1 billion in cash.

GM has cut its costs in the past few years. Deutsche Bank analyst Rod Lache estimates GM cut fixed costs in North America to $20 billion from $40 billion in 2008. He says the recent results show "these guys are building momentum and they have a lot of positives happening."

Earlier in the decade, the auto maker needed U.S. sales to reach 16 million to 17 million annually to make money. Today, GM says it can be profitable in the U.S. market with 10.5 million sales; analysts expect 11.5 million this year. Because bankruptcy slashed GM's debt, interest costs fell to $337 million in the first quarter, less than one-third the former level. Shifting retiree health costs to a union trust fund and other changes to retirement benefits reduced annual costs by another $3 billion.

Write to Randall Smith at randall.smith@wsj.com and Sharon Terlep at sharon.terlep@wsj.com

Info for GM Bondholders (Wilmington Trust)

Q:What is Wilmington Trust’s role?
A:Wilmington Trust is the successor Indenture Trustee to Citibank NA under two separate Indenture
agreements with General Motors, one dated November 15, 1990 and the second dated December 7, 1995.
Q:What is an Indenture Trustee?
A: An Indenture Trustee is the party under the contract that represents the rights and responsibilities of the
bondholders.
Q:What is a successor?
A: A successor in this situation is Wilmington Trust, who succeeded Citibank NA as the original Indenture
Trustee.
Q:What is an Indenture?
A: An Indenture is a contract underlying the bond issue and is between General Motors and the Indenture
Trustee.
Q:What are the securities, including rate, maturity, and CUSIP numbers, which are affected?
A: See attached listing below. *
Q: As a holder of General Motors debt am I going to get paid?
A: As a bondholder you will be represented by Wilmington Trust Company as Indenture Trustee.
Payments made to bondholders will be determined through the bankruptcy process and communicated
to you by Wilmington Trust as Indenture Trustee.
Q: How much will I be paid?
A: As a bondholder you will be represented by Wilmington Trust Company as Indenture Trustee.
Payments made to bondholders will be determined through the bankruptcy process and amounts paid
to bondholders will be communicated to you by Wilmington Trust as Indenture Trustee.
Q: How am I going to get paid?
A:When distributions are available Wilmington Trust as Indenture Trustee and its agents will pay the
holders of record for the securities directly via wire transfer or other method of distribution.
Q: Do I need to file a proof of claim?
A: As a bondholder you will be represented by Wilmington Trust Company as Indenture Trustee. This will
include the filing of necessary documents in the courts, including proofs of claim.
Q: As a bondholder, what do I need to do now?
A: At this time there is no action required on the bondholder’s part. Lines of communication remain open
between the bondholders and the Indenture Trustee and the Indenture Trustee will communicate on a consistent
and equal basis with all bondholders.
General Motors Bondholders
Frequently Asked Questions
Q:What are the next steps?
A:Wilmington Trust Company as Indenture Trustee will work closely with the bankruptcy court, the committees
that are formed, and the company, communicating with the bondholders as necessary and appropriate.
Q: How do I stay in touch with you?
A:Wilmington Trust as Indenture Trustee is creating a distribution list and will provide communications as
appropriate.
Q: Does Wilmington Trust hold any General Motors debt directly?
A:Wilmington Trust does not directly hold any debt of General Motors and has no direct credit exposure to
General Motors.
Q:Who is the General Motors Stock Transfer Agent?
A: Computershare is the stock transfer agent and they can be reached at 800 331-9922.
**Issue Name CUSIP# Outstanding Indenture Date Closed Date
GM Corp 9.40% Debs due 7/15/2021 370442AN5 $299,795,000.00 11/15/1990 7/22/1991
GM Corp 8.80% Notes due 3/1/2021 370442AJ4 $524,795,000.00 11/15/1990 3/12/1991
GM Corp 7.40% Debs due 9/1/2025 370442AR6 $500,000,000.00 11/15/1990 9/11/1995
GM Corp Medium Term Notes AG3 37045EAG3 $15,000,000.00 11/15/1990 7/22/1991
GM Corp Medium Term Notes AS7 37045EAS7 $48,175,000.00 11/15/1990 12/21/1990
GM Corp 7.75% Disc Debs due 3/15/2036 370442AT2 $377,377,000.00 12/7/1995 3/20/1996
GM Corp 7.70% Debs due 4/15/2016 370442AU9 $500,000,000.00 12/7/1995 4/15/1996
GM Corp 8.10% Debs due 6/15/2024 370442AV7 $400,000,000.00 12/7/1995 6/10/1996
GM Corp 6 3/4 Debs due 5/1/2028 370442AZ8 $600,000,000.00 12/7/1995 4/29/1998
GM Corp 7.20% Notes due 1/15/2011 370442BB0 $1,500,000,000.00 12/7/1995 1/11/2001
GM Corp 7.25% Q Int Bnds due 4/15/2041 370442816 $575,000,000.00 12/7/1995 4/30/2001
GM Corp 7 1/4 Sr Notes due 7/15/2041 370442774 $718,750,000.00 12/7/1995 7/9/2001
GM Corp 7.375% Sr Notes due 10/1/2051 370442766 $690,000,000.00 12/7/1995 10/3/2001
GM Corp 7.25% Sr Notes due 2/15/2052 370442758 $875,000,000.00 12/7/1995 2/14/2002
GM Corp 4.50% Series A Conv Sr Debs 370442741 $1,150,000,000.00 12/7/1995 3/6/2002
GM Corp 5.25% Series B Conv Sr Debs 370442733 $2,600,000,000.00 12/7/1995 3/6/2002
GM Corp 7.375% Sr Notes due 5/15/2048 370442725 $1,115,000,000.00 12/7/1995 5/19/2003
GM Corp 7.375% Sr Notes due 5/23/2048 370442BQ7 $425,000,000.00 12/7/1995 5/23/2003
GM Corp 8.375% Sr Debs due 7/15/2033 370442BT1 $3,000,000,000.00 12/7/1995 7/3/2003
GM Corp 6.250% Series C Conv Sr Debs 370442717 $4,300,000,000.00 12/7/1995 7/2/2003
GM Corp 8.25% Sr Debs due 7/15/2023 370442BW4 $1,250,000,000.00 12/7/1995 7/3/2003
GM Corp 7.125% Sr Notes due 7/15/2013 370442BS3 $1,000,000,000.00 12/7/1995 7/3/2003
GM Corp 7.50% Sr Notes due 7/1/2044 370442121 $720,000,000.00 12/7/1995 6/30/2004
GM Corp 1.50% Series D Conv Sr Debs 370442691 $1,500,000,000.00 12/7/1995 5/31/2007

GM BANKRUPTCY DEADLINE

Claims Information

Parties with claims related questions concerning Motors Liquidation Company can email claims@motorsliquidation.com, or call (800) 414-9607.
http://www.motorsliquidation.com/ClaimsInformation.aspx

MOTORS LIQUIDATION COMPANY
BAR DATE NOTICE FAQS
The Bankruptcy Court has set November 30, 2009 at 5:00 p.m. Eastern Time as the deadline for creditors, including governmental units, to file Proofs of Claim based on
claims that arose prior to June 1, 2009. This deadline is commonly referred to as the
“Bar Date.” Proofs of claim must actually be received by the Debtors prior to the Bar
Date. If you do not file your Proof of Claim before this deadline, you will lose your
potential claim against the Debtors.
Who are the Debtors?
The Debtors are the following entities:
• Motors Liquidation Company (formerly known as General Motors Corporation)
• MLCS, LLC (formerly known as Saturn, LLC)
• MLCS Distribution Corporation (formerly known as Saturn Distribution
Corporation)
• MLC of Harlem, Inc. (formerly known as Chevrolet-Saturn of Harlem, Inc.)
People Who Do Not Need to File Proofs of Claim:
You do not need to file a Proof of Claim by the Bar Date if:
• Your claim is correctly listed in the Debtors’ Schedules of Assets and Liabilities
AND is not listed as “disputed”, “contingent”, or “unliquidated” AND you agree
with the dollar amount and listing of your claim as scheduled
• Your claim has already been paid in full
• You have already filed a Proof of Claim
• One of the other “exceptions” described in paragraph 2 of the Bar Date Notice
applies to you
****** Please read the Bar Date Notice carefully to determine if you must file a Proof of
Claim. You should consult with an attorney if you are unsure whether you need to
file a Proof of Claim. A copy of the Bar Date Notice is available at
www.motorsliquidation.com. The Debtors cannot tell you whether or not you
need to file a Proof of Claim.
What is a Bar Date?
A Bar Date is a deadline for filing a Proof of Claim. The Bar Date is set by the
Bankruptcy Court. If you do not file a Proof of Claim by the Bar Date, you will be barred
from asserting your potential claim against the Debtors.
When is the Bar Date?
The Bankruptcy Court set November 30, 2009 at 5:00 p.m. Eastern Time as the Bar
Date.
MOTORS LIQUIDATION COMPANY
BAR DATE NOTICE FAQS
What is a Governmental Bar Date?
Governmental units/agencies typically have their own bar date. Here, the
Governmental Bar Date is the same as the General Bar Date - November 30, 2009.
What is a Proof of Claim form?
The Proof of Claim form is a fill-in-the-blank document that must be completed by the
creditor or the creditor’s legal counsel. Instructions for completing the Proof of Claim
form are set forth on the back of the Proof of Claim form. You will also need to attach
documentation substantiating your claim when you mail your Proof of Claim form.
Why did I receive a Proof of Claim form?
The Debtors mailed the Proof of Claim form to all known and potential creditors,
including, employees, vendors, suppliers, and some customers holding warranty claims.
Where can I find a copy of a Proof of Claim form?
A Proof of Claim form can be found at www.motorsliquidation.com or at the bankruptcy
court’s website at www.uscourts.gov/bkforms.
What is a “claim”?
A “claim” is a right to payment from the Debtors. Please review the Bar Date Notice for
a more detailed description.
I received a Bar Date Notice and Proof of Claim form. Does this mean that I have a
claim?
No. The Debtors must mail the Bar Date Notice to known and potential creditors,
including employees, vendors, suppliers, and some customers holding warranty claims.
You do not necessarily have a right to payment just because you received the Bar Date
Notice and Proof of Claim form.
What if I have a claim and do not file a Proof of Claim by the Bar Date?
You must submit your Proof of Claim form by the Bar Date or you will permanently lose
your potential claim against the Debtors.
MOTORS LIQUIDATION COMPANY
BAR DATE NOTICE FAQS
What is the deadline for filing claims arising from the rejection of an executory
contract?
The deadline is the later of (i) the Bar Date, and (ii) the date which is 30 days from entry
of the order approving the rejection.
Can I get an extension?
No, the Bar Date of November 30, 2009 at 5:00 p.m. Eastern Time was set by the
Court, and all Proofs of Claim must be submitted and actually received by the Debtors
on or before this time.
Can I e-mail or fax the Proof of Claim form?
No. You must mail or hand-deliver your Proof of Claim form to one of the address set
forth below. E-mails and faxes will not be accepted.
Can I send the Proof of Claim form to the Debtors?
No.
Where do I mail my Proof of Claim form?
You must mail your Proof of Claim form to:
If by overnight courier or hand delivery to:
The Garden City Group, Inc.
Attn: Motors Liquidation Company Claims Processing
5151 Blazer Parkway, Suite A
Dublin, Ohio 43017
If by first-class mail, to:
The Garden City Group, Inc.
Attn: Motors Liquidation Company
P.O. Box 9386
Dublin, Ohio 43017-4286
Or if by hand delivery to:
United States Bankruptcy Court, SDNY
One Bowling Green
Room 534
New York, New York 10004Does my Proof of Claim need to be received or stamped by the Bar Date?
Proofs of Claim must be mailed in enough time so that they are physically received on
or before November 30, 2009 at 5:00 p.m. Eastern Time.
MOTORS LIQUIDATION COMPANY
BAR DATE NOTICE FAQS
Where can I view a copy of the Schedules of Assets and Liabilities?
Copies of the Schedules are available electronically at the Debtors’ website
www.motorsliquidation.com, and on the Court’s official docket at ecf.nysb.uscourts.gov
(a user ID and password are required and can be obtained through the PACER Service
Center at www.pacer.psc.uscourts.gov).
You can also examine the Schedules between the hours of 9:00 a.m. and 4:30 p.m.
(Eastern Time) at the office of the Clerk of the Bankruptcy Court, United States
Bankruptcy Court for the Southern District of New York, One Bowling Green, Room 511,
New York, New York 10004.
You can obtain copies of the Schedules by writing the Debtors’ claims agent:
The Garden City Group, Inc.
Attn: Motors Liquidation Company
P.O. Box 9386
Dublin, Ohio 43017-4286
Who do I call or email if I need more information?
The Debtors cannot provide legal advice, tell you how to complete your Proof of Claim
form, or discuss your Scheduled claim. However, if you have specific questions that are
not answered by the Bar Date Notice, the Proof of Claim form, or these FAQs, you may
call or email: 800-414-9607; claims@motorsliquidation.com.

Obama's deal for GM Bondholders (WSJ)

JUNE 1, 2009 Majority of GM Bondholders Back Debt-for-Equity Deal
By SHARON TERLEP and KEVIN HELLIKER
DETROIT -- General Motors Corp. moved a step closer to what it hopes will be a smooth bankruptcy process after a majority of investors holding $27 billion in the company's bonds agreed to forgive the debt for equity in the new company.

A battle with the group was one of the biggest hurdles GM faced in orchestrating a quick exit from Chapter 11.

The Obama administration plans to usher GM into bankruptcy court Monday as part of its ambitious effort to remake the American car industry at the tail end of its decades-long decline. President Barack Obama is expected to announce the government's plans for GM in a speech that will try to convey the message that the government can rebuild GM and Chrysler LLC and salvage some of the taxpayers' investments.

The auto maker, living on U.S. government loans, faces a Monday deadline imposed by the Obama administration. GM announced Friday that Chief Executive Fritz Henderson would give a press conference on Monday in New York outlining proceedings that would likely take place.

Initially, the company said getting bondholders to agree to a debt swap was its best chance for avoiding Chapter 11. But the latest plan is designed to expedite a bankruptcy filling more than to avoid it. As part of the agreement, bondholders pledged not to oppose GM's reorganization in court.


Under the plan, the Treasury would provide GM with $30 billion in loans to keep running through a bankruptcy, in addition to $20 billion already given to the company. GM won't have to repay the loans; instead, the government will turn them into a controlling stake in the company. The United Auto Workers union would end up with at least a 17.5% stake in the new company after agreeing to concessions that will save GM about $10 billion in obligations to retiree health care as well as billions more on labor costs. In exchange, GM agreed to use a soon-to-be-determined idled plant to build a small car in the U.S.

GM and the Obama administration, encouraged by Chrysler's progress in bankruptcy court over the past month, hope the company could emerge in as little as 30 days. GM, however, could still face challenges from hundreds of dealers its trying to shut down. The company also is still negotiating with Delphi Corp., its bankrupt former parts arm.

It could be six to 18 months before GM becomes a publicly traded company again, administration officials said.

Under its restructuring plan, GM will shed billions in debt, gain billions in work-force savings, will close more than a dozen factories and reduce its network of dealers.

Amid those savings, the most crucial question facing GM -- and every other player in the global automotive industry -- is when demand will return, and with what force. Since January, new-vehicle sales in the U.S. have dropped nearly 40% to an annual rate of fewer than 9.5 million units a year. At that level, even Toyota Motor Corp. is losing money.


Although General Motors is most likely headed for bankruptcy, the car maker used to be king of the road and part of the fabric of American life.
Under the restructuring plan, the new GM would break even when the rate of new-vehicle sales in America reached 10 million a year -- by industry standards a highly competitive benchmark. In the view of analysts, economic recovery will unleash pent-up demand, pushing U.S. sales far past GM's break-even point, if not within reach of the historic peak of more than 17 million new-vehicle sales back in 2000.

But a new GM won't prosper without halting a decades-long slide in U.S. market share, to 22% in 2008 from 45% in 1980. In doing so, it faces a legacy of inconsistent quality that turned large swaths of the American market toward more-reliable foreign models.

Although GM in recent years has made tremendous gains in quality and design, a big question is whether it can maintain that progress following the retirement this year of Robert Lutz as vice chairman of global product development. Legendary for his role in developing such hot models as Chrysler's Dodge Viper and the Ford Explorer, Mr. Lutz came to GM in 2001 and launched a product turnaround that garnered two North American Car of the Year Awards and propelled Buick to the top of the J.D. Power & Associates long-term quality rankings.

GM's most anticipated car-in-the-works -- the electric-powered Chevrolet Volt -- is the brainchild of Mr. Lutz. "Can we keep it going -- that's the million-dollar question," says Jack Keebler, a former Motor Trend editor whom Mr. Lutz hired to review cars during the development process.

Mr. Keebler believes the progress will continue, saying GM has passed "the tipping point."

Bondholders had until Saturday evening to voice support for a new offer that would give them a 10% share of the restructured company and warrants for another 15%.

An ad hoc committee representing major bondholders agreed to support the offer and encouraged other big investors to back the deal. A group of dissident bondholders represented by Thomas Lauria, also a lawyer for holdouts in the Chrysler case, fought against the deal. He argued that small, individual bondholders were left with no voice as the Treasury negotiated directly with GM's large institutional holders.

It was up to Treasury, which brokered the deal, to determine whether enough bondholders agreed for the offer to stand. A spokesman for the bondholder committee said approximately 54% of the bonds have indicated their support and that 975 institutions either sent support letters or gave indications of support.

The government sweetened the offer last week after bondholders overwhelmingly rejected an earlier proposal that would have left them with 10% equity in the new GM.

Analysts' estimates have bondholders coming out of the new deal with around 10 cents on the dollar, compared to as little as nothing under the old offer.

Write to Sharon Terlep at sharon.terlep@dowjones.com and Kevin Helliker at kevin.helliker@wsj.com

Printed in The Wall Street Journal, page A1

GM Reaches a Deal with Largest Bondholders (NY Times)

May 28, 2009, 9:42 am

click link for the SEC filing

G.M. Reaches a Deal With Bondholder Committee
General Motors said in a regulatory filing on Thursday that it has proposed a new deal to a committee representing many of its largest bondholders, offering up to a 25 percent stake in exchange for not opposing G.M.’s reorganization plan.
The filing also fills out many of the details of that plan, crafted under the eye of the Treasury Department.

Under the terms of the deal, G.M.’s bondholders would receive a 10 percent stake in the newly reorganized carmaker. They will also receive warrants to buy an additional 15 percent of a new G.M. if the company rises to a certain level of value.

GM bondholders unite (Bloomberg)

Chrysler Dissidents’ Lawyer Seeks GM Bondholders for New Fight


By Tiffany Kary and Christopher Scinta

May 27 (Bloomberg) -- The lawyer who represented Chrysler LLC’s dissident lenders is organizing some General Motors Corp. bondholders and plans to argue in any GM bankruptcy that the loser this time will be will be Main Street, not Wall Street.

GM, the largest U.S. automaker, faces a probable bankruptcy filing by June 1 following the refusal of bondholders to accept a 10 percent equity stake in a new company, part of a U.S.- backed plan to give the American and Canadian governments equity ownership of as much as 69 percent and a 17.5 percent trust for unions. GM bondholders hold $27 billion in claims.

“The difference with GM is that, whereas the ‘bad guys’ in Chrysler were hedge funds, who Obama called ‘speculators,’ here they’re Main Street -- individual retirees who bought bonds when they were like gold bullion,” said Thomas Lauria, a lawyer with White & Case LLP who represents Chrysler lenders fighting that company’s U.S. backed reorganization. Lauria said he is seeking to represent GM bondholders in any bankruptcy of that company.

In the Chrysler case, the dissident debt holders disbanded 10 days after the company collapsed, citing political pressure that began when U.S. President Barack Obama criticized the group. Evan Flaschen, chairman of the restructuring department at law firm Bracewell & Giuliani LLP, said uncooperative GM bondholders may be less politically vulnerable.

Retirees Versus Retirees

“The story that hasn’t been told is, this isn’t GM’s union retirees versus the bondholders. It’s retirees versus other retirees,” said Flaschen, who isn’t involved in the GM matter. While Chrysler’s dissidents lost steam because they were forced to identify themselves and faced public stigma, including alleged death threats, GM’s opponents may be harder to criticize, Flaschen said.

GM Chief Executive Officer Fritz Henderson has said the U.S. Treasury allowed the automaker very little flexibility in its negotiations with bondholders. Julie Gibson, a spokeswoman for GM, declined to comment.

“We’re stuck, we need the white knight,” said Gary Thomas, a retired auto mechanic and GM bondholder, in an interview. “I’m not asking for special treatment, I’m just asking for parity. I just feel like whatever the UAW gets, the bondholders should get.”

Roger Kerson, a spokesman for the United Automobile Workers Union, didn’t return a call seeking comment. Jenni Engebretsen, a spokeswoman for the Treasury, didn’t respond to an e-mail seeking comment.

Individual Creditors

Thomas said he has joined a group of individual creditors called GM Bondholders Unite that wants Lauria to represent them. The group is trying to gather investors and hire legal representation to get “fair and equitable treatment” in a bankruptcy, according to its Web site.

Former GM employee Jim Graves, 58, said he represents his 80 year-old mother, Vivian Floyd. Graves, of Celebration, Florida, said he plans to fight the government’s offer to return pennies on the dollar for her $100,000 investment in GM bonds.

“What it boils down to is about half a cent on the dollar at today’s price of GM stock,” he said. “It’s stunningly unfair.”

Graves calculated that his mother’s bonds may be worth 9 cents on the dollar if stock in the new GM reaches half of the company’s decade-long high of about $63 a share. Graves, part of a group calling itself The Main Street Bondholders Coalition, said he didn’t have legal counsel.

Lauria said he seeks to represent some individual GM retirees if Detroit-based GM seeks court protection. As with Chrysler, the attorney said the Obama administration is subverting the U.S. bankruptcy code.

Last Month

In the case of Auburn Hills, Michigan-based Chrysler, filed last month in U.S. Bankruptcy Court in Manhattan, Lauria argued on behalf of a group of hedge funds calling themselves “Non- TARP” lenders. He sought to distinguish his clients from recipients of taxpayer money from the Troubled Asset Relief Program who backed the U.S. plan.

The lawyer claimed that the U.S.-backed reorganization plan for Chrysler subverted the law by paying some unsecured creditors more than secured creditors, who by law, he said, should have priority.

“Obama painted the Chrysler non-TARP lenders as evil, but when you look at whose investing in these funds, it’s pension plans and mutual funds,” said attorney Michael Foreman of Dorsey & Whitney LLP. “Who’s investing in mutual funds and pensions? It’s people on Main Street.”

Lauria didn’t disclose which GM bondholders he represents. He said he would seek to have his fees paid out of the GM bankruptcy estate.

Nevin Reilly, a spokesman representing the ad hoc group of bondholders that has been negotiating with GM, declined to disclose the identities of the holders his group represents.

Junior Creditors

Workers aren’t always treated as junior creditors. The U.S. bankruptcy code specifically provides for employees to get preference over bondholders, said Richard Hahn, co-chairman of the bankruptcy practice at Debevoise & Plimpton LLP, a New York law firm, who isn’t involved in the GM negotiations.

Section 1114 of the code requires a debtor “timely pay” all retiree benefits unless the bankruptcy court orders otherwise, or the authorized representative of the recipients of those benefits agrees to other treatment, Hahn said.

In a GM bankruptcy case, Lauria said he would argue that, because unions and bondholders are both unsecured creditors, their claims should get equal treatment.

He said GM’s initial offer to bondholders would have given union-workers 12 times their recovery. Under the new U.S.- plan, bondholders will still get less than the unions, he said.

“The new paradigm seems to be that the contractual rights of creditors can be overwritten to protect politically favored entities like labor unions,” Lauria said.

‘Unfair’ Plan

Flaschen predicted that, while the U.S.-backed reorganization plan for GM may be “unfair” under the bankruptcy code, it’s bound to succeed.

“To put it crassly, you need the employees going forward, you don’t need the bondholders,” Flaschen said.

Flashchen said bondholders may argue against the U.S.- funded debtor-in-possession loan that calls for a “good GM” and a “bad GM,” claiming it violates federal bankruptcy law by being a secret plan of reorganization.

GM’s $3 billion of 8.375 percent bonds maturing in 2033 have fallen to 7.13 cents on the dollar from 21 cents at the beginning of the year and 70 cents 12 months ago, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 115 percent.

GM and the U.S. are likely to say that bondholders will get more under its plan than in a liquidation, Flaschen said.

“If you were the judge, you would be told by the government, that if GM liquidates--if you don’t do this--another 2 million people will be out of jobs,” Flaschen said. “Do you want to be the judge who decides that?”

The Chrysler bankruptcy case is In re Chrysler LLC, 09- 50002, U.S. Bankruptcy Court for the Southern District of New York (Manhattan)

To contact the reporters on this story: Tiffany Kary in U.S. Bankruptcy Court in New York at tkary@bloomberg.net and; Christopher Scinta in U.S. Bankruptcy Court in New York at cscinta@bloomberg.net.
Last Updated: May 27, 2009 17:44 EDT

Website for GM Bondholders

http://www.gmbondholdersunite.com/

GM Bondholders Hanging Tight - NY Times Dealbook

May 22, 2009, 8:03 am

G.M. and Creditors Face White-Knuckle Weekend
The long weekend will be anything but a holiday for General Motors, the giant automaker struggling to stay out of bankruptcy protection.

The company reached a deal Thursday with its union on concessions, but it is now racing the clock to persuade its bondholders to eliminate $27 billion in debt and avoid a bankruptcy filing.

G.M. has until Tuesday to persuade thousands of bondholders to agree to swap their debt for equity, which would fulfill its last significant requirement for restructuring ordered by President Obama. There appears to be little chance that the required 90 percent of bondholders will agree to its terms, making the prospect of bankruptcy increasingly likely for G.M., The New York Times’s Bill Vlasic reported.
Analysts said that the United Automobile Workers’ deal with G.M., which followed similar concessions to Chrysler, will increase pressure on bondholders to accept the company’s offer.

“I think there’s a shot it will succeed, but a very small one,” David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., told The Times.
A coalition of small bondholders protested the terms of G.M.’s offer in Washington on Thursday. Larger, institutional bondholders have also opposed the deal, which calls for them to receive 225 shares of G.M. stock in exchange for each $1,000 worth of debt.
A G.M. spokesman, Greg Martin, told The Times the company had made no decision on whether to extend the exchange offer beyond the Tuesday deadline.
“We have made it clear that our viability requires us to take these actions to restructure our operations and reduce the liabilities and debt on our balance sheet,” Mr. Martin said.

G.M., which is subsisting on $15.4 billion in government loans, has until June 1 to meet the broad criteria for restructuring spelled out by a special presidential auto task force.

Under a plan announced last month, the Treasury Department would control at least 50 percent of the stock in a restructured G.M. A health care trust for union retirees would have about 39 percent, with bondholders getting 10 percent and current shareholders the remaining 1 percent.

Advisers to a committee of G.M.’s biggest bondholders, representing about 20 percent of the $27 billion in bond debt, have repeatedly criticized the plan as unfair and designed to fail. They have also accused the government of seeking to use them as scapegoats for a potential bankruptcy filing. Under their own proposal, G.M. bondholders would own 58 percent of the reorganized carmaker. These advisers have said that they are willing to negotiate with the company and the government but have made no headway thus far.
As for the U.A.W., details of its agreement with G.M. are being withheld pending a ratification vote by 61,000 union workers in the United States, which is expected to take place next week. But the deal does include financing the retiree trust. People close to the talks said the union agreed to allow G.M. to finance half of its future retiree health care costs — estimated at $20 billion — with company stock.

The Obama administration hailed the agreement as an important step in G.M.’s comeback plan.

The U.A.W.’s president, Ron Gettelfinger, had been critical of G.M.’s plans to cut an additional 21,000 union jobs, as well as increase its imports of vehicles made in China, South Korea and Mexico.

Whether those job cuts are addressed in the agreement is still unclear. But by agreeing to amend its contract, the union can rightfully say it has completed the task laid out for it by the Treasury Department.

Since G.M. first appealed for government assistance last fall, the U.A.W. has made several modifications to its 2007 contract, including eliminating a program that guarantees paychecks to laid-off workers. By completing its agreement on health care, the union has heeded Mr. Obama’s call for shared sacrifice among all G.M. stakeholders to fix the troubled company.

“The union has worked very well to create the right optics and to be in sync with the message the White House has put out there,” John Casesa, a principal in the automotive consulting firm Casesa Shapiro Group, told The Times.

The U.A.W.’s deal with G.M. follows a similar health care agreement it reached with Chrysler, which is also surviving on government loans.

Despite the agreement, Chrysler was forced to file for bankruptcy protection on April 30 after it failed to persuade a group of banks and hedge funds to unanimously agree to take cash payments to retire $6.9 billion in debt.

Now G.M. will make one last push to persuade its bondholders to take equity for their debt.

G.M.’s president, Fritz Henderson, has said repeatedly that bankruptcy is a “probable” outcome because of the difficulty in persuading 90 percent of the bondholders to agree to its restructuring terms.
In the event of a bankruptcy filing, the bondholders may be offered less attractive terms in exchange for their debt.

“The financial community and the union trust have been in competition for this stock,” Mr. Cole of the Center for Automotive Research told The Times. “But with the union deal settled, the pressure is only going to increase on the bondholders.”

Main Street GM Bondholders (from theStreet.com)

Automakers What if GM Bondholders Got Cars?
Ted Reed
05/20/09 - 12:20 PM EDT
Updated from 8:53 a.m. EDT

Unsecured bondholders of General Motors(GM Quote) are looking at the prospect of pennies on the dollar for their investments.

Perhaps cars for debt is a better option than equity for debt, even if it is an unlikely one.

"A lot of my little mom-and-pop investors might be better off picking up a shiny new automobile from a dealer being closed down by GM," says Jim Martin, president of the 60 Plus Association, a seniors advocacy group that created a spinoff group, "Main Street" bondholders, to represent GM bondholders in response to members' concerns.

"Let's face it, going into bankruptcy, they may lose everything, and probably will," Martin says. "A lot of people are telling me the bonds won't be worth the paper they are printed on. A new car beats nothing."

GM spokeswoman Julie Gibson says the company's offer is the only one on the table. "There's only one offer that we are legally authorized to make, and that's the one we made," she says.

Gibson notes that the Obama administration's auto task force is "the final authority" on what the automaker can offer shareholders. "I honestly have no idea whether there's room for negotiation or not," she says.
Right now, that offer is to swap about $27 billion in bonds for 10% of the shares in a new GM. Bondholders are being asked to swap at the rate of 225 shares for every $1,000 of principal. The exact value of the proposed exchange is unclear, but typically in bankruptcy, unsecured bondholders get pennies on the dollar.

Share of GM were trading up 20 cents to $1.47 shortly after 12 p.m. Monday.

Some big bondholders, holding about 20% of the $27 billion, are represented by a group that calls itself the Ad Hoc Committee of General Motors Bondholders and have retained an attorney.

By contrast, individual bondholders, who number in the thousands, are not represented. However, their support for the restructuring plan is necessary because the U.S. Treasury has determined that about 90% of the bondholders need to accept the offer in order for GM to avoid bankruptcy.

In that regard, while it is conceivable that Martin's suggestion that new cars be offered could potentially ease the path to a deal, the obstacles -- including the large number of bondholders and the short amount of time -- are plentiful; the Treasury has shown no inclination to make changes, and the widespread consensus view is that GM will be forced to file for Chapter 11 bankruptcy.
Even Jim Graves, a Celebration, Fla., software developer who is a member of the Main Street Bondholders, has doubts about accepting a car in lieu of financial assets. Graves owns about $100,000 worth of GM bonds, which he acquired starting in April 2008; his mother, a retired GM employee, also has $100,000 worth.

Graves says his mother suggested his purchase of the bonds, and he liked the relatively high yield. Now, he says, "No one has explained to me the rationale where the government will forgive ($15.4 billion) and take 50% of the stock, while the bondholders will forgive $27 billion and take 10%."
He had hoped the government would pay cash to the bondholders, mitigating the need to dilute the stock. Now his hope is that bondholders will get more than 10% of the company and that the shares will start to rise after the new stock is issued.

As for getting a new car instead, Graves has little interest and noted that his mother bought a Saturn in January.

Meanwhile, Martin says that about 300 bondholders have contacted him. Main Street Bondholders has held events in Warren, Mich.; Tampa, and Philadelphia, and plans one in Washington on Thursday.
"We've got a tiger by the tail," Martin says. "The little guy is being squeezed and he does not have a seat at the negotiating table.

"We're not talking about speculators here," he says. "A lot of these people put money for retirement into these bonds, and they didn't see this coming (because) GM is an icon. They should have some say-so."

Financial Times: GM Bondholders to Obama: We Are Main Street

Private GM bondholders face large losses
By Nicole Bullock

Published: May 18 2009 19:34 | Last updated: May 18 2009 19:34

“Creditors have better memories than debtors,” says Chris Crowe, an electrician and home inspector from Denver, who stands to lose his son’s college fund on what has turned out to be a poor investment in the bonds of General Motors.

Quoting Benjamin Franklin, Mr Crowe made an impassioned plea for a better deal for GM’s bondholders during a rally of individual investors in Philadelphia last week. The group, which calls itself the “Main Street” bondholders, has also gathered in Tampa, Florida and Warren, Michigan. This week they head to Washington, DC, to lobby their congressional representatives. A press conference is planned for Thursday.

Small bondholders and large money managers alike oppose a government-backed plan that calls for them to swap their $27bn in bonds for a 10 per cent equity stake in GM. Without their support, GM is likely to follow its smaller rival Chrysler to bankruptcy court by the end of the month.

Individual investors hold about 20 per cent of the $27bn in unsecured debt in question. Beyond GM, individuals form a significant part of the overall US corporate bond universe – although their presence in this market is not as big as it is in the municipal bond market, where individuals are the bedrock buyers, or the stock market.

Data from the Federal Reserve show US households hold $1,600bn in corporate bonds, 25 per cent of the $6,300bn market. Typically, they are holders of blue-chip companies, rather than obscure small caps.

One of the main reasons for this is that retail investors and particularly retirees in need of income have been attracted by the higher yields that corporate bonds pay, against the background of a long decline in US interest rates.

Robert Williams, director of income planning at the retail brokerage Charles Schwab, said: “People look at their bond portfolio and they want to chase yield.

“There is no way around the fact that higher yields come with higher risk.”

Bondholders at the GM meeting in Philadelphia did not understand that risk as they scooped up GM bonds yielding 7 to 8 per cent. Several said they thought their money was relatively safe because they owned bonds instead of GM stock, even as the company’s business prospects deteriorated. Equity holders have a weaker position than bondholders in the event of a corporate default. GM also sold $4.7bn “retail notes” that were designed for individuals.

The GM bond dispute is playing out against a rally in corporate bonds, in spite of expectations of the worst spate of defaults in US history and larger losses than ever on the debt of companies in distress.

Since early March, US investment-grade corporate bonds have returned 6.7 per cent and high-yield bonds 23 per cent after losing 6.8 per cent and 26 per cent, respectively, in 2008, according to a Merrill Lynch index. MGM Mirage, the casino operator that warned of default just a few months ago, sold $1.5bn junk bonds last week.

Retail investors have recently poured cash into high-yield mutual funds at a record rate. They are drawn by high interest rates compared with the alternatives and a confidence that the losses will not be as severe as they might have thought a few months ago. If they are right, the rewards for this extra risk will be high.

The average yield on investment-grade bonds is 6.81 per cent and for junk bonds it is almost 15 per cent. The 10-year US Treasury yields 3.15 per cent.

However, the GM experience shows losses can be large when a corporate bond investment sours, a fact that will have been noted by many other individual holders of GM bonds.

With time running out on a June 1 deadline imposed by the government for GM to sort out sacrifices among its creditors, a bankruptcy filing looks likely. GM bonds fell to fresh lows last week with long-term debt quoted at less than 5 cents on the dollar.

GM’s bondholders argue that they are being asked for disproportionate concessions compared mainly with the United Automakers Union. Bond analysts largely agree. Unions will receive 39 per cent of GM and $10bn in cash over time for a $20bn claim that is related to a healthcare benefit fund and, like GM bonds, is unsecured.

The GM situation follows a bankruptcy at Chrysler where a group of its secured lenders, which did not inc­lude individuals, dismissed a debt-cutting deal as unfair.

The GM bondholders are calling on Barack Obama, US president, to intervene on their behalf for better terms in GM’s restructuring and for a voice in the negotiations. Only about 35 supporters attended the Philadelphia meeting and about 30 showed up for the rally the same day in Tampa. But the Main Street bondholders have one advantage over the large money managers who dominate the market and GM’s investors base.

“These retail bondholders might have a political lever to pull,” said a securities litigator at a big New York firm.

At last week’s rally, Mark Modica took the podium and said: “I have more than one reason to hope that GM stays out of bankruptcy.” Mr Modica not only holds GM bonds; he is also a manager at a GM dealership.

The group and the events are being sponsored by the 60 Plus Association, a non-profit conservative advocacy group for senior citizens.

Meanwhile, William Nast, a semi-retired lawyer from Harrisburg, Pennsylvania, is looking at a loss of almost $9,000 that he will not soon forget. “Maybe the next time I look for a car, I will look at a Ford,” he says. But he makes it clear he will probably steer well clear of Ford bonds.

Copyright The Financial Times Limited 2009

GM Restructuring Plan: More on Monday (Marketwatch)

GM CEO to host another restructuring update Monday

By Shawn Langlois
Last update: 4:17 p.m. EDT May 8, 2009


SAN FRANCISCO (MarketWatch) -- General Motors Corp. 4:00pm 05/08/2009

GM 1.61, -0.01, -0.6%) said Friday that CEO Fritz Henderson will hold a conference call Monday to update the media on the automaker's progress in its restructuring efforts ahead of a June 1 deadline. The call will mark the second such update since Henderson took over the top job from Rick Wagoner in March. The U.S. government gave GM until the end of the month to reach concessions with bondholders and the United Auto Workers union to avoid a bankruptcy filing.

GM financials point toward Bankruptcy (Bloomberg News)

GM Loss Widens to $5.98 Billion as Bankruptcy Looms (Update1)

By Jeff Green and Katie Merx

May 7 (Bloomberg) -- General Motors Corp. said its first- quarter net loss widened to $5.98 billion as sales plunged by almost half, ratcheting up the prospect of a bankruptcy filing by a U.S.-imposed June 1 deadline.

The net loss of $9.78 a share swelled from $3.3 billion, or $5.74, a year earlier, Detroit-based GM said today. Revenue tumbled 47 percent to $22.4 billion, while cash consumption almost doubled from the previous quarter.

The results add to the pressure on GM as it races to cut costs and debt to avoid bankruptcy. With bondholders resisting a plan ordered by the Obama administration to exchange $27 billion in debt for a minority stake in a reorganized GM, the 100-year- old automaker may end up in court.

“If the deadline for proving viability is a few weeks away, these earnings would indicate to me that it’s nearly impossible to get there,” said Kevin Tynan, a New York-based Argus Research analyst who advises selling GM. He said “a clean slate from bankruptcy” may be the best way to return to profit.

GM is ready to go “in and out quickly” should it need to file for bankruptcy, Chief Financial Officer Ray Young told reporters at the automaker’s headquarters. The proposed debt exchange with bondholders is the biggest piece of $44 billion in obligations that GM is working to shrink as it survives on $15.4 billion in emergency federal aid.

Cost Structure

“The first-quarter results reinforce the plan we announced at the end of April to bring our cost structure down aggressively,” Young said.

Excluding some costs, the first-quarter loss was $9.66 a share, or $5.9 billion, GM said. That beat the average $10.97 loss estimate from 11 analysts surveyed by Bloomberg.

The biggest U.S. automaker used $10.2 billion more in cash than it generated from operations, almost twice as much as the consumption of $5.2 billion in the fourth quarter. Cash on hand at the end of March was $11.6 billion, a decrease from $14.2 billion as of Dec. 31, as new government aid partially offset the drain on GM’s reserves.

Young said the cash use was less than GM projected in a February report to the U.S. Treasury, in part because of $3 billion in structural cost reductions in the quarter. He reiterated that GM will need $2.6 billion in U.S. Treasury funds in May and $9 billion more after that.

GM dropped 6 cents, or 3.6 percent, to $1.60 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 50 percent this year for the worst performance in the Dow Jones Industrial Average, and they may be removed, said John Prestbo, the editor and executive director of Dow Jones Indexes.

‘Revenue Implosion’

GM slashed quarterly output by about 40 percent to 903,000 vehicles as demand waned, which accounted for “the revenue implosion,” Young said.

The net deficit included one-time gains from erasing some debt and charges such as $822 million in costs related to the Feb. 20 bankruptcy of its Saab Automobile AB unit, which GM wants to unload. Before today, losses at the company totaled $82 billion since 2004, its last profitable year.

President Barack Obama set the June 1 bankruptcy deadline on March 30, giving GM 60 days to restructure out of court. He rejected the company’s original plan to shed 47,000 jobs this year and cut about $28.5 billion in union and bond debt, saying it wasn’t enough to return the automaker to viability.

Under the survival plan unveiled April 27, GM agreed to kill the Pontiac brand, close two more plants and eliminate at least 7,000 more union jobs by the end of next year. GM said today it expects to cut more salaried and executive jobs, without elaborating.

U.S. Control

GM’s plan envisions that the U.S. would control at least 50 percent of 60 billion shares in a restructured company, and a union-run health-care fund would get as much as 39 percent. Unsecured bondholders would get 10 percent and existing shareholders would get 1 percent, GM said.

Bondholders would receive 225 shares in the new automaker for each $1,000 in principal. When the exchange is complete, GM would do a 1-for-100 reverse split of the stock.

Without support from 90 percent of the bondholders by May 26, GM plans to file for bankruptcy, Chief Executive Officer Fritz Henderson said after unveiling the offer.

Bondholders countered that proposal with a plan calling for GM to give them 58 percent of the equity in the reorganized company. Henderson told reporters earlier this week that the Treasury has indicated it “would not be supportive of shareholding in excess of 10 percent” for the bondholders. GM’s 8.375 percent bonds due in July 2033 fell 0.35 cent to 8 cents on the dollar, yielding 102 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. Dwindling Sales

The discussions among GM, Obama’s car task force and the bondholders are unfolding against a U.S. auto market that shrank 34 percent last month.

GM reported an adjusted automotive operating loss of $3.9 billion in the first quarter, wider than the $808 million deficit a year earlier.

Each of the automaker’s regions experienced a drop in earnings from a year earlier due to slumping sales, with the $3.2 billion operating loss in North America the worst deficit.

Without a new cost-saving labor agreement, GM’s Canada unit will be liquidated, the Canadian Auto Workers union said today, citing discussions with government officials. CAW leaders told reporters in Toronto they had been ordered back to the bargaining table with GM under a May 15 deadline to reach an accord or lose the possibility of more government aid.

Young said there were sales bright spots in such markets as China, Germany and Brazil, where governments implemented programs to stimulate demand. Results in those countries support GM’s argument in favor of U.S. incentives to promote auto purchases, he said.

“We just need to get this bankruptcy speculation and rumor behind us,” Young said during a conference call. “That’s clearly having an impact on our sales.”

To contact the reporters on this story: Jeff Green in Detroit at jgreen16@bloomberg.net; Katie Merx in Detroit at kmerx@bloomberg.net.

Last Updated: May 7, 2009 16:21 EDT

GM Bondholders Group loses Loomis Sayles (Bloomberg)

Loomis Sayles Sells Its GM Bonds,

By Caroline Salas

May 6 (Bloomberg) -- Loomis Sayles & Co. sold all of its General Motors Corp. notes and quit the bondholder group that’s trying to improve the automaker’s debt-exchange offer.

Loomis Sayles, which manages more than $107.7 billion, was part of the original committee of GM bondholders that formed last year after the Detroit-based automaker received federal loans conditioned on a restructuring. Loomis Sayles sold its GM bonds last month and is no longer on the committee, said Erin Heard, a spokeswoman for the Boston-based firm. She declined further comment.

GM and its bondholders are at odds over $27 billion in claims ahead of a June 1 deadline. The bond group called GM’s April 27 offer to swap their claims for a 10 percent equity stake “neither reasonable nor adequate” and asked to be treated more equitably with labor unions. The counter-proposal by bondholders hasn’t been adopted.

GM’s offer is “grossly unfair to the point of abusive,” Glenn Reynolds, chief executive officer of CreditSights Inc. in New York, wrote in a report this week. “Politics remains an overriding factor in the equation and has been decidedly unfriendly to the interest of bondholders in a contest with the disproportionately outsized power of organized labor and other Washington-heavy constituencies and interest groups.”

CreditSights recommends bondholders reject GM’s debt exchange and expects the offer to fail.

Firm’s Holdings

Given the Obama administration’s willingness to place Chrysler LLC into court protection after an impasse with its lenders, GM may also have to file for bankruptcy in order to restructure, said Martin Fridson, CEO of New York-based credit investment firm Fridson Investment Advisors.

Loomis Sayles owned more than $113 million of GM bonds at the end of March, including over 7 percent of GM’s $1.25 billion of 8.25 percent debt due in 2023, according to data compiled by Bloomberg.

The 2023 notes fell 1.3 cent to a record low of 6.9 cents on the dollar at 3:11 p.m. in New York to yield 115 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt has tumbled from 20 cents at the start of the year and 72 cents in April 2008.

President Barack Obama blamed “a group of investment firms and hedge funds” for tipping Chrysler into bankruptcy and said he didn’t “stand with those who held out when everybody else is making sacrifices.” The lenders include OppenheimerFunds Inc., Stairway Capital Management LP and Group G Capital Partners LLC, according to court documents filed today.

‘Strange Approach’

Chrysler’s dissident lenders lost a fight to keep their identities secret, revealing themselves after U.S. Bankruptcy Court Judge Arthur Gonzalez ordered the disclosure, overruling concerns about death threats and allegations that Obama’s criticism of their stance would damage the lenders’ reputations.

“The attack on institutional investors by the administration in this process is a very strange approach and borders on demagoguery,” CreditSights’ Reynolds wrote in the report. “The bondholders are being painted into a corner and will have no chance but to stand and fight. You can call them names as long as they get treated fairly. Offer them virtually nothing and then call them names? Now that’s just cold.”

Bondholders met with the Obama administration’s auto task force on April 30 and proposed they get a 58 percent ownership stake in GM in exchange for their claims. The creditor group objected to the automaker’s proposal they get a 10 percent share while a union health fund would get $10 billion in cash and as much as a 39 percent stake for $20 billion in unsecured claims.

GM offered bondholders 225 shares of stock for each $1,000 of principal. At least 90 percent must accept the exchange for the automaker’s debt-reduction plan to work.

Nevin Reilly, a spokesman for the ad hoc committee of GM bondholders, declined to immediately comment.

To contact the reporter on this story: Caroline Salas in New York at csalas1@bloomberg.net
Last Updated: May 6, 2009 15:35 EDT

GM stock wipeout (Reuters)

GM plans to wipe out current shareholders
Wed May 6, 2009 7:38am BST
By Kevin Krolicki

DETROIT (Reuters) - General Motors on Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM's shares could be worthless whether the company restructures out of court or in bankruptcy.
The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM's stock investors with just 1 percent of the equity in a restructured carmaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

GM shares closed on Tuesday at $1.85 on the New York Stock Exchange. The stock would be worth just over 1 cent if the first phase of GM's restructuring moves forward as described.

Once GM has issued new shares to pay off its debt to the U.S. government, bondholders and its major union, it said it would then undertake a 1-for-100 reverse stock split.
Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM's existing shareholders would see their stake in the 100-year-old automaker all but wiped out.

The automaker said it expected to draw another $2.6 billion (1.7 billion pounds) from the U.S. Treasury before a June 1 deadline set by the Obama administration for it to reach agreements with all of its key stakeholders.

That borrowing would take GM's debt to the U.S. government to $18 billion, and the carmaker said it expected to have to borrow a total of nearly $27 billion.

GM has asked its three major creditor groups to write off at least $43 billion in debt in exchange for ownership of a restructured company.

By contrast, the current market value of GM's current 610 million shares is about $1.7 billion.

The stock has lost about 43 percent of its value since the start of the year.

GM bondholders, who are owed $27 billion, have also been offered new stock in exchange for writing off debt in a bond exchange the automaker launched last week.

The carmaker is targeting a debt-reduction of at least $24 billion of its bond debt under the plan and has warned that it could be forced into bankruptcy if that cannot be achieved.

Representatives of GM bondholders, who would be given a 10-percent stake in the new company under the carmaker's restructuring, have said they are being offered an unfairly low payout. They have asked instead for a majority stake in the restructured company.

But GM has asked the U.S. autos task force to accept a majority stake in a new GM in exchange for at least half of the government debt that the carmaker has run up over the past four months.Chief Executive Fritz Henderson said on Tuesday that the U.S. Treasury, which oversees the task force, was continuing to evaluate the company's restructuring plan and its progress.

"The Treasury will continue their evaluation through the month, which is fine. But we're not waiting, we're implementing. The bond exchange needed to be launched when we launched it," Henderson said. "Now we'll have to see."

In its filing, GM said it was in "ongoing discussions" with the U.S. Treasury on its proposal to swap government debt for equity in the largest U.S. carmaker.

Finally, GM is negotiating with the UAW and is seeking to get the union to take GM stock in exchange for $10 billion owed to a trust fund for retiree healthcare.

Those talks were set to resume this week in Detroit, Henderson said.

GM said in its SEC filing that its three-pronged effort to slash debt could take its total authorized share issuance -- including new and existing shares -- to 62 billion shares.

(Reporting by Kevin Krolicki; editing by Carol Bishopric, Bernard Orr)

WSJ Opinion: Mauling of GM Bondholders

Thursday, April 30, 2009 Opinion Journal


REVIEW & OUTLOOK APRIL 30, 2009
Gettelfinger Motors The mauling of GM's bondholders reveals Treasury's political hand.

President Obama insisted at his press conference last night that he doesn't want to nationalize the auto industry (or the banks, or the mortgage market, or . . .). But if that's true, why has he proposed a restructuring plan for General Motors that leaves the government with a majority stake in the car maker?

The feds have decided they should own a neat 50% of GM, yet that is not the natural outcome of the $16.2 billion that the Treasury has so far lent to the company. Nor is the 40% ownership of GM that the plan awards to the United Auto Workers a natural result of the company's obligations to the union.

Yet Secretary Timothy Geithner and his auto task force, led by Steven Rattner, have somehow decided that Treasury and UAW chief Ron Gettelfinger will get to own a combined 90% of GM. If there's a reason other than the political symbiosis among the Obama Administration, Michigan Democrats and the auto union, it's hard to discern. From now on let's call it Gettelfinger Motors, or perhaps simply the Obama Motor Company, though in the latter they'd have to change the nameplates.

The biggest losers here are GM's bondholders. According the Treasury-GM debt-for-equity swap announced Monday, GM has $27.2 billion in unsecured bonds owned by the public. These are owned by mutual funds, pension funds, hedge funds and retail investors who bought them directly through their brokers. Under Monday's offer, they would exchange their $27.2 billion in bonds for 10% of the stock of the restructured GM. This could amount to less than five cents on the dollar.

The Treasury, which is owed $16.2 billion, would receive 50% of the stock and $8.1 billion in debt -- as much as 87 cents on the dollar. The union's retiree health-care benefit trust would receive half of the $20 billion it is owed in stock, giving it 40% ownership of GM, plus another $10 billion in cash over time. That's worth about 76 cents on the dollar, according to some estimates.

In a genuine Chapter 11 bankruptcy, these three groups of creditors would all be similarly situated -- because all three are, for the most part, unsecured creditors of GM. And yet according to the formula presented Monday, those with the largest claim -- the bondholders -- get the smallest piece of the restructured company by a huge margin.

This seems to be by political design. GM CEO Fritz Henderson says Treasury insisted that bondholders receive, at most, 10% of the company. "We went to the maximum and offered 10%," Mr. Henderson said. Mr. Rattner's office did not return our calls, so we can't say why Mr. Rattner wanted private risk capital cut out of the ownership of the new GM, but no one has contradicted Mr. Henderson.

Some Treasury officials have told the media that 50% government ownership is important to ensure that taxpayers get repaid for the $16.2 billion in Treasury loans. But this is false logic. Taxpayer-shareholders are likely to be far better off with a smaller stake in a truly private company that is better insulated from political meddling. Private owners are more likely than the Treasury or the unions to try to run the company for profit, and so increase its equity value over time. Treasury says it would be a hands-off owner, but that hardly seems plausible and in any case that would merely leave the UAW in control. At the next labor contract bargaining session, the union would sit on both sides of the table.

GM, the government and the bondholders all insist that a bankruptcy filing would be a disaster. GM's SEC filing on the debt-equity swap also warns darkly that if the requisite 90% of bondholders don't agree to these terms, they may recover little or nothing in bankruptcy court. But given the choice between a 10% stake in Gettelfinger Motors and the independent mercies of a bankruptcy judge, bondholders could be forgiven for taking their chances in court.

Certainly the bondholders deserve to take a haircut like everybody else. But squeezing them in such a blatant fashion has other consequences. Who would be crazy enough to lend GM money in the future? The Treasury also says it wants banks that do poorly in its "stress tests" to try to raise private capital before putting in more public money. The mauling of GM creditors tells investors not to invest in TARP banks because everything this Treasury touches turns to politics.
Monday's offer is so devoid of economic logic or fairness that it confirms the fears of those who said the original bailout would lead to a nationalized GM run for political ends. This fiasco will in part go down on George W. Bush's copybook, since he first decided GM was too big to fail.

But rather than use his early popularity to force hard decisions through the bankruptcy code, President Obama has decided in essence to have the feds run GM and Chrysler. This inevitably means running them for the benefit of the UAW that is so closely tied to the Democratic Party. Next up will be tax changes and regulations intended to coax, or coerce, Americans to buy Gettelfinger Motors cars. This tale of taxpayer woe is only beginning.





Printed in The Wall Street Journal, page A14
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