GM bondholders launch counter-offer

GM bondholders launch counter-offer
By John Reed in London
Copyright The Financial Times Limited 2009
Published: April 30 2009 14:24 | Last updated: April 30 2009 16:25
http://www.ft.com/cms/s/0/c0f4b0fc-3587-11de-a997-00144feabdc0.html


General Motors’ bondholders on Thursday launched a counter-offer to the carmaker’s debt exchange proposal made earlier this week that would see them claim majority control of the company, but the US federal government hold no shares.

GM’s ad hoc bondholders’ committee said they would be willing to swap their $27bn of notes for 58 per cent of the carmaker’s shares. The plan would see a healthcare fund managed by the United Auto Workers’ union own 41 per cent of “the new GM” and current shareholders retain 1 per cent of Detroit’s largest carmaker.

The proposal would see no ownership role for the government and “prevent the nationalisation of one of the country’s largest companies,” the group said in a statement.

GM’s exchange offer, made on Monday, proposed that bondholders swap their paper for 10 per cent of the company. The carmaker’s proposal would see the government take majority control in exchange for retiring $10bn of emergency loans made since December. GM’s remaining shares would mostly be owned by the UAW.

The offer was rejected by many of GM’s bondholders, who oppose retiring their debt for a minority stake in a company that many think has an uncertain future.

“Unlike the current proposal, our plan does not grant a controlling interest in GM to the federal government,” said Eric Siegert, senior managing director of Houlihan Lokey Howard and Zukin, and advisor to the bondholders’ committee. “We think that this is an extremely attractive proposition given our current fiscal crisis.”

The group said their proposal would “save the U.S. taxpayer $10bn.” GM was not immediately available for comment on Thursday morning.

Shares in GM were 8 cents higher at $1.89 in early New York trading.

GM faces an end-May deadline to swap most of its debt and much of its healthcare obligations for equity in the company, or file for Chapter 11 bankruptcy protection.

Chrysler, its smaller rival, has until midnight on Thursday to complete its own restructuring plan and an alliance with Italy’s Fiat, or file for creditor protection.