GM Bondholders OK New Offer of 25% Stake

May 28, 2009

(ChattahBox)—After an exhausting negotiating session that finally ended on 5 a.m. Thursday, a major bondholder committee finally agreed to a revised offer from General Motors, which promises up to a 25 percent stake in GM, providing the bondholders don’t oppose the Chapter 11 bankruptcy plan.

The diverse committee of GM bondholders represents entities and individuals, which hold nearly 20 percent of the total bonds’ value.

The bondholders group previously rejected a plan for a 10 percent stake in GM. The new plan includes the original 10 percent stake with an additional incentive of warrants to purchase an additional 15 percent of the “new” G.M., providing that G.M.’s value rises to pre-approved levels.

The bondholder committee believes this is the best deal they can get, in light of the impending bankruptcy filing. Opposition to the bankruptcy filing would involve lengthy and expensive litigation, which the bondholders have no stomach for at this point.

The bondholders need to submit their statements of support by Saturday to preserve the terms of the revised offer. Without sufficient support statements, the total amount of stock and warrants would be significantly reduced.

The new GM regulatory filing revealed that the U.S. government is providing $50 billion to fund the costs associated with the bankruptcy filing. In a unique sale of itself in a 363 transaction, GM would be sold in the reorganization, resulting in a brand new GM with $17 billion in debt remaining.

Meanwhile, negotiators are still seeking potential suitors for Opel, the European division of GM. The Italian automaker, Fiat and a Canadian auto parts company, Magna are in contention to take over Opel.



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