Report: GM Set For June 1 Bankruptcy

Automaker To File For Chapter 11 Protection Despite Reaching Deal With Bondholders, Sources Say

(CBS/AP)  General Motors Corp. plans to file for bankruptcy protection June 1, despite reaching a deal with bondholders to swap debt for stock, sources told Bloomberg Thursday.

Earlier Thursday, GM said a committee of bondholders had agreed to a sweetened deal proposed by the U.S. government to erase the automaker's unsecured debt in exchange for company stock.

The news came in a regulatory filing that spells out the Obama administration's game plan for what it hopes will be a speedy Chapter 11 bankruptcy reorganization that will leave the U.S. government as the dominant GM shareholder with a much smaller debt load.

The plan, laid out in an SEC filing, would give the government a 72.5 percent stake in a new GM, but the administration said it could cost taxpayers another $30 billion, reports CBS News correspondent Anthony Mason. Washington has already invested more than $19 billion to keep GM's motor running.

But people familiar with GM's plans said the automaker would still file for bankruptcy protection on Monday.

The government proposal is similar to the approach taken in the bankruptcy reorganization approach used by Chrysler Corp. Its plan to shed assets and sell control of a downsized carmaker to Fiat, aided by government financial assistance, could receive final approval from a bankruptcy court judge in New York before the end of the week.

With Chrysler and GM, the government is driving a hard bargain.

"They're providing the money. And they're the ones who are ultimately going to decide how that money's going to be spent," bankruptcy attorney Steve Jakubowski told Mason.

The government's goal for GM is to eventually return it to profitability, allowing it to eventually sell its shares. But the risks for taxpayers are daunting, with U.S. auto sales near their lowest level in 27 years.

The revised offer to the holders of $27 billion in unsecured GM bonds amounted to a take-it-or-leave-it ultimatum: Go along with what the government auto task force's proposal or be left holding the assets a new GM doesn't want - ones with presumably little value at all.

In addition to the 10 percent of the stock in a newly formed GM that was originally rejected by bondholders, the new offer would give them warrants to acquire an additional 15 percent stake at a deep discount. That would come only if they agree to support selling the company's assets to a new company under bankruptcy court protection.

The Securities and Exchange Commission filing said that if the bondholders don't agree to support the sale, then the amount of stock and warrants they get would be substantially reduced or eliminated.

Under the proposal, which has a deadline of 5 p.m. Saturday, GM would enter bankruptcy protection and its good assets would be separated from bad ones.

A United Auto Workers' retiree health care trust fund will get 17.5 percent and the old GM, effectively owned by the unsecured bondholders, would get a 10 percent stake.

The plan envisions the slimmed-down new GM, shorn of more plants and brands, would have $17 billion in long-term debt and $9 billion in debt-like preferred shares. That would represent a 61 percent decline from its existing debt load of about $67 billion.

Only $8 billion of the existing U.S. government loans would remain on the books; the remainder would be converted into equity of the new GM.

A bondholders committee and other large debtholders agreed to the deal but still called it unfair. They collectively hold about 20 percent of GM's unsecured debt.

"While the committee continues to remain troubled by preferential treatment that the UAW VEBA is receiving compared to the bondholder class - rejecting this offer in the expectation that the bondholders will do better in a litigated outcome was a risk the committee is unwilling to take," the committee said in a statement.

The deal would wipe out GM's $27 billion in unsecured bond debt, converting to equity a total of $50 billion in company debt.

GM's filing said that if the deal goes through, the new GM would emerge with a total of $17 billion in debt - $8 billion owed to the U.S. government, $2.5 billion to the UAW trust and $6.5 billion in mainly overseas and capital lease debt.

It was unclear what would happen to the GM's current $6 billion worth of secured debt, but the person familiar with the GM plan said the U.S. government will provide financing to operate the new company and for the old GM to be liquidated.

An Obama administration official said the holders of GM's $6 billion in secured debt would be fully repaid. The official did not want to be identified because the plans had not been made public.

Some analysts look at the probable bankruptcy as a chance for GM to remake itself.

"General Motors is not going away anymore then Chrysler is going away. But we are going to see a better, stronger, faster moving general motors. A better version of it's current self," Rebecca Lindland, of IHS Global Insight, told CBS News.

In a potential bankruptcy, GM would likely shed four of its brands - Pontiac, Saab, Hummer and Saturn - though the government has promised to back any warranties for those brands, reports CBS News correspondent Jeff Glor. That would leave four core brands for the automaker - Chevrolet, Cadillac, Buick and GMC.

Trading of GM shares was halted for a short time Thursday morning, but resumed to rise 6 cents, or 5.2 percent, to $1.21 in midday trading.

An Obama administration official said the agreement is an important step in GM's restructuring and said the government's auto task force "will continue efforts to help ensure that GM emerges from restructuring as a strong, viable company that can operate independent of government support."

[armyoftwelve]

Unbelieveable, still most steel companies came out of bankruptcy quite well in the 1990's. The people who are really going to get screwed are the retirees!

One thing Mr. Obama should do that he still hasn't done is make sure that promised pensions are 100% funded by the companies that offer pensions. No more dumping unfunded liabilities on the PBGC!!

[dfnj2009]

GM is the worse managed company in American history. Wagner's lavish pension is valued at $22 million dollars. No company deserves to survive when giving out such lavish benefits to all their executives. This is pure insanity! Let them die.

[erasmus111]

No, it means you were trying to mooch forgiveness for free.

If I cant' tell you feel remorse, then it isn't remorse.

You must confess and repenet before you are worthy of forgiveness.

Posted by weedapeapz at 7:07 AM : May 29, 2009

:P

[weedapeapz]

more like SQUANDERED, THREW AWAY into a company that I said months ago would go belly up bankrupt, just as they will June1 anyway despite the $19 billion.
Posted by Newster1 at 10:51 PM : May 28, 2009

Le'ts tell it like it is -

Pelosi & co GAVE AWAY $19 billion on a company that was already going down the drain.

Now she and Obama have BROKEN THE UNION in addition to giving away billions of dollars of OUR MONEY that will never be repaid. And the CEO's pocketed the money and immediately declared bankruptcy.

Doesn't anybody get it?

The Democrats LOVE GREEDY RICH CROOKS like Madoff and Joe Kennedy.

They PRETEND they "help the poor," but really they are all about breaking up unions and helping greedy crooks stuff their pockets with OUR MONEY!!!!

When Democrats describe Republicans as greedy rich crooks, they are just describing themselves.

Obama hates the workers. He wants to replace us all with foreign workers, so we will be left desperate and starving and at his mercy.

Obama IS the next 9/11 attack.

[weedapeapz]

I do feel remorse, you just can't tell. And did I not say "forgive me"? That shows that I was feeling remorse.
Posted by erasmus111 at 6:44 PM : May 28, 2009

No, it means you were trying to mooch forgiveness for free.

If I cant' tell you feel remorse, then it isn't remorse.

You must confess and repenet before you are worthy of forgiveness.

[MamaLulu2004]

We have sunk billions of dollars in the war with Iraq...what do we get back from that beside dead young soldiers???

Why shouldn't the government sink money into an American company and actually own part of that company? I think there is a chance the taxpayers will get money back from GM....but, I have yet to see money back from Iraq!!!!!!!

Keep America going....not some foreign desert country that is full of coconuts!!!!!!!

[Newster1]

"Washington has already invested more than $19 billion to keep GM's motor running. "

"Invested" is not quite the word for it, more like SQUANDERED, THREW AWAY into a company that I said months ago would go belly up bankrupt, just as they will June1 anyway despite the $19 billion.
The Govt owning 50% of a garbage can is still 50% of a pile of worthless trash, no one is stupid eough to buy a $25,000 machine from aco going BANKRUPT and firing employees left and right- those same ones will be bitter and angry and probably sabotage parts or assemblies going in the new cars to get even.
I wouldn't touch one of those dying assembly line cars if it was $5,000 now!

[Newster1]

"General Motors is not going away anymore then Chrysler is going away. But we are going to see a better, stronger, faster moving general motors. A better version of it's current self."

BWHAHAHA, first they need to build a dam car that WORKS, that doesnt have 25 recalls a year, that doesnt fall apart before its paid for, that doesnt cost $25,000 for 4 wheels and a seat!

[erasmus111]

I notice you dont' express much remorse over your transgression.

Posted by weedapeapz at 6:27 PM : May 28, 2009

I do feel remorse, you just can't tell. And did I not say "forgive me"? That shows that I was feeling remorse.

[erasmus111]

Then one day I wondered why my back hurt every time I sat at the computer, and then this light bulb went off over my head.....

Posted by weedapeapz at 6:25 PM : May 28, 2009

I see that your lightbulb is a little slow to come on, too, huh?

[erasmus111]

Oh, nice! You would WISH me to bang my head on the cupboard door? Have YOU ever done that?

Posted by weedapeapz at 6:25 PM : May 28, 2009

I sure have. I was trying to quit smoking one time, I was feeling dizzy, and I banged my head and just about knocked myself senseless. I had to go sit down and have a cigarette.

[weedapeapz]

my mousey just moved to the Submit button and bang, it was done. : )
Posted by erasmus111 at 6:18 PM : May 28, 2009

I notice you dont' express much remorse over your transgression.

If you want forgiveness, you must confess and repent first.

No, it isn't just recommended, it isn't just suggested.

The Bible clearly says that you MUST be born again...

[weedapeapz]

When you are mean to me, I might wish that you would stub your toe, or I might wish that you bang your head on the cupboard door, but I would never wish you to be in constant pain. : )

And why is it that MEN seem to have a hard time accepting that they need glasses? When I couldn't see, I rushed right out to the drug store and bought a pair. I don't live in denial about things.
Posted by erasmus111 at 6:16 PM : May 28, 2009

Oh, nice! You would WISH me to bang my head on the cupboard door? Have YOU ever done that?

Maybe you should try it on yourself before you go wishing it on others.

Shame shame on you.

And it wasn't resisting getting glasses. I really didn't notice that I was slouching.

Then one day I wondered why my back hurt every time I sat at the computer, and then this light bulb went off over my head.....

but the whole light bulb over the head experience can be reproduced with electrodes or LSD, so it's all just an illusion. Human thought is all in our heads.....

[weedapeapz]

of a sudden my mousey just moved to the Submit button and bang, it was done. : )
Posted by erasmus111 at 6:18 PM : May 28, 2009

The spirit is willing, but the flesh is weak.

Your conscience lost that round, I see.

[erasmus111]

Did you check with your conscience before you clicked SUBMIT?

Posted by weedapeapz at 6:06 PM : May 28, 2009

Yes, I did. There was a war going on for about 2 seconds, but then all of a sudden my mousey just moved to the Submit button and bang, it was done. : )

[erasmus111]

You wish :-)

Actually, the best thing I did for my back was to buy a pair of reading glasses.

Posted by weedapeapz at 6:05 PM : May 28, 2009

That wasn't nice. Of course I would never wish that upon you. When you are mean to me, I might wish that you would stub your toe, or I might wish that you bang your head on the cupboard door, but I would never wish you to be in constant pain. : )

And why is it that MEN seem to have a hard time accepting that they need glasses? When I couldn't see, I rushed right out to the drug store and bought a pair. I don't live in denial about things.

[Ichabod09]

Gang this has been fun, but I gotta go. I'm semi-retired now. I work about two days a week now and as the old joke goes-tomorrow is the day. Get my stuff set out to go to work.

[weedapeapz]

When fish head checks back in a few hours to see how long we kept spouting off while he was gone, he's gonna ROTFLHAO.

He can be so annoying.

No wonder he gets banished.

[weedapeapz]

Either that, or you had horseshoes up your butt. (Forgive me.) : )
Posted by erasmus111 at 5:51 PM : May 28, 2009

Did you check with your conscience before you clicked SUBMIT?

I didn't think so.

Shame on you.

[weedapeapz]

So you are suffering all the time?
Posted by erasmus111 at 6:00 PM : May 28, 2009


You wish :-)

Actually, the best thing I did for my back was to buy a pair of reading glasses.

I spent 20 years in the high tech industry, and I spent most of the time peering into a computer monitor.

Then we got computers at home - and you know how that is, once you get computers you can never get rid of them no matter what exterminator you call.

Then I developed an inability to focus my eyes at exactly the distance of a computer monitor, so I had to start slouching forward to focus on the monitor.

The bad posture was causing excruciating pain in my legs.

The I bought some cheap reading glasses at Wal-Mart. Because that's all I can afford thanks to free trade, so free trade becomes a self-fulfilling policy.

Now I can focus at the normal distance, so I can sit back and keep a proper posture.

My leg pains went away.

I'm wearing the glasses right now. It's much more comfortable this way.