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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Bloomberg : Raw Deal for GM Bondholders

GM Offers to Exchange $27 Billion of Debt for Equity (Update3)


By Caroline Salas

April 27 (Bloomberg) -- General Motors Corp. asked its bondholders to exchange $27 billion of claims for equity to help the biggest U.S. automaker avert bankruptcy.

GM, faced with a deadline from President Barack Obama to restructure, is offering bondholders 10 percent of the equity in the reorganized company, according to a news release today. Bondholders will also receive accrued interest in cash if they tender their holdings.

At least 90 percent in principal amount of the notes need to be exchanged to satisfy the U.S. Treasury, and without enough participation by June 1, GM expects to file for bankruptcy, the Detroit-based company said in the statement.

“You have a gun being put to your head saying that ‘If you don’t take this, we have something that’s even worse for you,’” said Shelly Lombard, a Montclair, New Jersey-based analyst for bond research firm Gimme Credit LLC. “It looks like a raw deal for bondholders. I just don’t think they have the negotiating leverage to get anything better than what’s currently on the table.”

Bondholders will be given 225 shares of GM common stock for each $1,000 in principal amount of notes tendered. The offer is contingent on cutting at least another $20 billion in liabilities by reaching a deal with the United Auto Workers over a retiree-medical fund and the U.S. converting loans to equity. GM has received $15.4 billion in aid from the U.S. government.

Bonds Rise

GM’s $3 billion of 8.375 percent bonds due in 2033 rose 2.4 cents to 11.15 cents on the dollar as of 10:42 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields about 74 percent.

The Obama administration ousted Chief Executive Officer Rick Wagoner last month, saying that GM’s plan to return to profit wasn’t aggressive enough, and ordered new CEO Fritz Henderson to cut the automaker’s debt by more than initially demanded. GM will be forced to go into a government-supported bankruptcy without deeper cost cuts from its creditors by June 1, the administration said.

“A debt-for-equity swap has been expected and remains an unattractive option for bondholders -- it’s just kicking the can further down the road,” said Wesley Sparks, a high-yield portfolio manager and head of U.S. credit strategies at Schroder Investment Management in New York, which doesn’t own the automaker’s bonds. “A restructuring of the company is inevitable.”

Proof of Viability

GM is trying to prove it’s viable, a U.S. requirement to keep the federal loans. The original loan terms called for GM to slash two-thirds of its bonds through an exchange offer and for the UAW to reduce a cash contribution to the health-care fund to $10.2 billion from $20.4 billion.

The bond exchange offer is contingent on the health-care fund, known as a Voluntary Employee Beneficiary Association, or VEBA, swapping at least 50 percent of its claims for equity, with the remainder of the obligations paid in cash “over a period of time,” according to the statement.

The proposal is also conditional on the U.S. Treasury agreeing to exchange 50 percent of its loans at June 1, estimated to be $10 billion, for stock. The VEBA and the U.S. Treasury would own about 89 percent of the common stock in the reorganized GM after their debt exchanges, the statement said. The remaining 1 percent of stock would be held by GM’s existing common shareholders.

Retiree Investors

GM has thousands of bondholders ranging from institutional investors including insurers and pension funds to individual retirees. The ad-hoc committee of bondholders, whose members include San Mateo, California-based Franklin Resources Inc. and Loomis Sayles & Co. of Boston, balked at two other plans it was shown since December.

Before Wagoner was removed, GM had proposed that bondholders swap more than three-quarters of their stake for equity, according to a person familiar with the talks. That offer would have given bondholders 90 percent of the equity of the reorganized automaker and a combination of cash and new unsecured notes, the person said at the time.

Credit-default swaps protecting against a GM default for one year fell after the offer. The contracts dropped 5 percentage points to 79 percent upfront, according to broker Phoenix Partners Group. That’s in addition to 5 percent a year, meaning it would cost $7.9 million initially and $500,000 over a year to protect the debt.

To contact the reporter on this story: Caroline Salas in New York at csalas1@bloomberg.net

Last Updated: April 27, 2009 11:24 EDT

it's out: GM OFFER TO BONDHOLDERS swapping stock for debt

This link will bring up more details of the offer:
http://www.gm.com/corporate/investor_information/exchange-offer/


GM to offer $27 billion stock-for-debt swap

By Christopher Hinton
Last update: 8:36 a.m. EDT April 27, 2009
NEW YORK (MarketWatch) -- General Motors Corp. (GMGeneral Motors Corp


GM) said Monday it intends to offer $27 billion in common stock to its debt holders as part of a restructuring plan. According to the Securities and Exchange filing, GM will offer 225 shares of common stock to each $1,000 of debt. The Detroit automaker values the offer at $27.2 billion, and has set a deadline for debt holders to respond by May 26. "Exchange offers are a vital component of GM's overall restructuring plan to achieve and sustain long-term viability and the successful consummation of the exchange offers will allow GM to restructure out of bankruptcy court," the company said in a statement

CNN: GM not paying June 1 interest

GM won't make $1B June debt payment

June payment would be due a day after government's deadline for company to submit restructuring or bankruptcy plan.

By Peter Valdes-Dapena, CNNMoney.com senior writer
April 22, 2009: 1:10 PM ET

NEW YORK (CNNMoney.com) -- General Motors won't be making a June 1 debt payment of $1 billion, a company spokeswoman said Wednesday.

The debt is due the day after GM's government-imposed May 30 deadline to have an aggressive restructuring plan in place or be left to face bankruptcy.

GM (GM, Fortune 500) said it wouldn't make the June 1 payment because as part of its restructuring, the company will be offering to exchange bondholder's debt for equity in the company.
"We're going to have an exchange offer open anyway," said GM spokeswoman Julie Gibson.

A press representative for GM bondholders was not immediately available to comment.

While GM CEO Fritz Henderson has said that bankruptcy has become "more likely" in recent weeks, he has also said that an out-of-court restructuring remains a viable option.

GM has received $13.4 billion in federal loans and could receive an additional $5 billion before May 30. Beyond that, the Treasury department task force overseeing restructuring for GM and Chrysler has not said how much more support GM might be eligible to receive if it is able to restructure and reduce its debts and other obligations.








Find this article at:
http://money.cnn.com/2009/04/22/autos/gm_june_debt

OBAMA PLAN: GM BOND HOLDERS TO GET STOCK (REUTERS)

EXCLUSIVE-UPDATE 3-GM readies all-equity offer for debt-sources
Sat Apr 18, 2009 1:30am BST



* Equity conversion for bondholder, UAW debt-sources

* Offer targets $48 bln of debt in equity exchange-sources

* Treasury could convert its own loans to GM stock-sources (Adds analyst comment)

By Soyoung Kim and Emily Chasan

DETROIT/NEW YORK, April 17 (Reuters) - The Obama administration has directed General Motors Corp (GM.N) to prepare a new restructuring plan that would pay off bondholders and the automaker's major union in stock in exchange for $48 billion in debt, people briefed on the plan said on Friday.

The U.S. Treasury, which has provided $13.4 billion in emergency funding to keep GM operating since the start of the year, has indicated that it could also convert those taxpayer-backed loans into GM stock, the sources told Reuters.

GM, which is working to complete a restructuring that could include a bankruptcy filing, plans to make the new proposals to bondholders and the United Auto Workers union within the next two weeks, the sources said.

The sources asked not to be identified because of the confidential nature of the talks between the automaker and President Barack Obama's autos task force, which is charged with retooling the U.S. auto industry.

GM and UAW representatives could not be immediately reached for comment. A Treasury spokeswoman had no comment.

The proposals emerged after two weeks of intense talks between the autos task force, headed by former investment banker Steve Rattner, and GM executives in Detroit.

The stock-based payout to GM's major union and its bondholders would represent much deeper concessions for both groups than the terms they had been offered under the GM bailout loans approved by the Bush administration.

"The task force was clear this was the best way for GM to achieve success going forward," said one of the sources.

Under the terms of its former restructuring plan, GM had aimed to cut its roughly $28 billion of bond debt by two-thirds and convert half of the remaining $20 billion it owes to its retiree health care fund in equity, rather than cash.

But the autos task force rejected that plan, saying GM needed to cut more debt from its balance sheet in order to be a profitable company.

It was not clear what specific terms the UAW would be offered, but both people briefed on the plan said the union's higher payout relative to bondholders would be maintained.

An equity-based debt exchange would make the union, the U.S. government and GM's existing bondholders all major stockholders in the recapitalized automaker.

Peter Kaufman, president of investment bank Gordian Group LLC, said GM bondholders would only agree to the terms of the deal under discussion if they feared they would do worse without such an agreement headed into a bankruptcy for GM.

"I continue to maintain that any deal that happens outside bankruptcy will result in an nonviable GM," he said. "Why would bondholders take this deal? Only if they feared that a worse deal would ensue in Chapter 11."

TWO-TRACK APPROACH

GM Chief Executive Fritz Henderson, who assumed the top job in late March when the Obama administration ousted his predecessor, Rick Wagoner, told reporters on Friday that GM management had spent the past two weeks working with U.S. officials on a revised business plan.

That plan, which will include more job cuts and plant closures, will be shared with bondholders and the union as talks on the planned debt restructuring intensify in coming weeks, he said.

Henderson said it was still feasible for GM to avoid bankruptcy, but said the automaker was also working on detailed plans for a filing if it is forced to take that route.

"From the perspective of bondholders and the union, equitizing their debt would heighten the need for GM to have a viable business plan and a management team to execute on it," Gordian's Kaufman said.

Earlier, a person familiar with the plans of a committee representing GM bondholders said the creditor group was willing to make "deep concessions" if GM can produce a viable business plan and get equal sacrifices from other stakeholders. [ID:nN17347408]

The talks between GM and the UAW and between the automaker and its bondholders have been largely stalled since February. Those negotiations have played out in parallel because both groups are negotiating an unsecured claim under the threat of bankruptcy.

The UAW, which has made a series of concessions to GM since 2005, has defended its proposed higher payout ratio of 50 percent versus roughly 33 percent for bondholders as justified by its prior actions.

The union agreed to create a trust -- known as a Voluntary Employee Beneficiary Association -- as the centerpiece of a ground-breaking 2007 contract intended to slash GM's costs. (Reporting by Soyoung Kim and Emily Chasan; writing by Kevin Krolicki; editing by Leslie Gevirtz, Richard Chang)

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