GM Bondholders Make Counter Proposal (Marketwatch)

Bondholders present plan to win GM control
By Shawn Langlois, MarketWatchLast Update: 10:24 AM ET Apr 30, 2009


SAN FRANCISCO (MarketWatch) -- General Motors bondholders on Thursday will present a counteroffer to the automaker's debt swap that would relieve creditors of their $27 billion of debt in return for a majority stake in the company.

The move, which also aims to ease concerns over the U.S. government nationalizing the Detroit giant, comes as similar talks between Chrysler and its debt holders reportedly were on the verge of collapse.

The ad hoc committee of GM (GM) bondholders said their plan would see them get 58% of the new company in return for debt forgiveness while saving U.S. taxpayers $10 billion in cash.
The union health-care fund, based on the $20 billion in benefits owed, would own 41%. Existing stockholders would receive 1% of the new GM under the plan.

Eric Siegart, senior managing director of Houlihan Lokey Howard and Zukin and financial advisor to the bond group, said the government would not get equity under the scenario because it would not have to reduce any of its $20 billion in loans.

"We do not believe that nationalizing one of America's largest and most important companies is the right policy decision for our country," he said.

The group plans to propose the plan to the Auto Task Force on Thursday afternoon, but President Barack Obama's team previously urged creditors to take the original proposed deal or risk getting even less in the courts.

Treasury officials have said that 90% of GM bondholders must take part in the exchange. The automaker has until June 1 to complete the debt-for-equity swap to avoid a bankruptcy filing.

GM shares gained 3.9% to $1.88 in early trades but are still down 92% in the past year.




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