Government Motors: Majority of GM Bondholders Back Debt-for-Equity Deal
May 31st, 2009Via: Wall Street Journal:
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, people familiar with the situation said.
A battle with the group was one of the biggest hurdles 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 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 UAW 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.
$50 billion for a company that can’t compete, and yet, as you pointed out in a recent post, only $467 million can be found for solar AND geothermal research combined. Sickening.
For those interested, I threw together a few comparisons:
President Obama Announces Over $467 Million in Recovery Act Funding for Geothermal and Solar Energy Projects
source: http://www.energy.gov/news2009/7427.htm
C. Boyden Gray on Oil Subsidies
http://www.cato-at-liberty.org/2006/12/21/c-boyden-gray-on-oil-subsidies/
The study, co-authored by major Republican C. Boyden Gray and published in a conservative law journal out of the University of Texas, alleges that the oil industry is subsidized to the tune of $250 billion a year
467,000,000/250,000,000,000 = 0.00186, or 0.19%
Defense budget: $533.7 billion for the Department of Defense base budget in 2010
source: http://www.whitehouse.gov/omb/asset.aspx?AssetId=729
467,000,000/533,700,000,000 = 0.000875, or 0.09%
Financial Rescue Nears GDP as Pledges Top $12.8 Trillion (Update1)
source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=armOzfkwtCA4
467,000,000/12,800,000,000,000 = 0.000036484375, or 0.004%
Majority of GM Bondholders Back Debt-for-Equity Deal
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.
source: http://online.wsj.com/article/SB124377589042969721.html?mod=googlenews_wsj
467,000,000/50,000,000,000 = 0.00934 or 0.9%