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GM bondholders present plan for out-of-court restructuring
Wagoner meets with task force and German economy minister
March 17, 2009 - 12:01 am ET
UPDATED: 3/17/09 9:52 a.m. ET
DETROIT (Reuters) -- Advisers to General Motors' bondholders said Monday they have presented a framework plan to President Barack Obama's autos task force and the company that provides GM's best chance for an out-of-court restructuring.
In a statement, advisers to the ad hoc committee of GM bondholders said the framework plan for a debt-to-equity exchange was "consistent with the government's restructuring requirements under the terms" of emergency government loans provided to the automaker.
"It (the framework) provides the best chance ... of completing an out-of-court restructuring by securing a high level of acceptance among a diverse group of GM bondholders -- from mutual funds to pension funds to retail bondholders," the statement added.
The plan, which was presented to the autos task force and GM several weeks ago, "is one of several options on the table that seeks to achieve a successful out-of-court restructuring," the statement said.
GM bondholders face pressure under the terms of the automaker's bailout from the U.S. government to reduce by two-thirds the roughly $27 billion they are owed, through an exchange for new equity in a recapitalized company.
Bondholders have balked at those proposed terms, saying they are unfair given the payout terms being offered to workers represented by the United Auto Workers union and the remaining debt at GM.
The statement from bondholders came the same day task force adviser Steve Rattner was quoted in a Detroit Free Press newspaper interview as saying bondholders were being "quite difficult" in talks intended to cut GM financing costs.
Rattner also was quoted as saying the UAW had been "very constructive" in talks with GM and Chrysler over restructuring payments due union retiree healthcare trusts.
Rattner also told the newspaper that bankruptcy was not the task force's goal, saying it was "never a good outcome for any company, and it's never a first choice."
A representative from Treasury could not be reached for comment.
GM CEO Rick Wagoner was in Washington on Monday to meet with task force members, according to a person familiar with the meeting who was not authorized to speak publicly. The meeting was described as ongoing fact-finding by the panel.
Wagoner also met with the German Economy Minister Karl-Theodor zu Guttenberg on Monday night. Guttenberg told reporters after the talks that GM appeared willing to help Europeans in saving the automaker's Opel Unit.
Guttenberg, in Washington ahead of a meeting Tuesday with U.S. Treasury Secretary Timothy Geithner, said it was essential for GM to find a private investor. One scenario could involve GM taking a minority stake.
Guttenberg said there were still many open questions that needed to be addressed.
Germany is open to the possibility of helping Opel but has said it needed to be sure no state support would find its way to GM, which is seeking more bailout help from the U.S. government to survive. Opel has said it needs financial support to survive.
GM bondholders face pressure under the terms of the automaker's bailout from the U.S. government to reduce by two-thirds the roughly $27 billion they are owed, through an exchange for new equity in a recapitalized company.
GM and No. 3 U.S. automaker Chrysler LLC face a March 31 deadline when the autos task force must decide whether the companies can be restructured successfully.
GM has received $13.4 billion in emergency government loans and Chrysler has taken $4 billion so far. Both automakers have requested additional billions of additional dollars in loans to help them stave off bankruptcy.
The U.S. auto industry is suffering from its worst downturn in decades, with industrywide sales down more than 40 percent in February.
Statement from the advisors to the ad hoc committee of GM bondholders:
Several weeks ago we presented the President's auto task force and GM management with a framework for constructing a successful debt-to-equity exchange. The framework we proposed meets two important objectives. First, it is consistent with the government's restructuring requirements under the terms of the bridge loan. Second, it provides the best chance, given the parameters set forth in the plan, of completing an out-of-court restructuring by securing a high level of acceptance among a diverse group of GM bondholders – from mutual funds to pension funds to retail bondholders.
The framework we set forth is one of several options on the table that seeks to achieve a successful out-of-court restructuring, and we look forward to discussing the merits of any proposal that brings about the fundamental changes necessary to position GM for long-term success. We continue to believe that the best result for all stakeholders – and for the American economy – is a viable, competitive GM. We stand ready to do our part to bring about a workable solution.
As such, we are eager to continue our discussions with both GM and the auto task force.
Wagoner meets with task force and German economy minister
March 17, 2009 - 12:01 am ET
UPDATED: 3/17/09 9:52 a.m. ET
DETROIT (Reuters) -- Advisers to General Motors' bondholders said Monday they have presented a framework plan to President Barack Obama's autos task force and the company that provides GM's best chance for an out-of-court restructuring.
In a statement, advisers to the ad hoc committee of GM bondholders said the framework plan for a debt-to-equity exchange was "consistent with the government's restructuring requirements under the terms" of emergency government loans provided to the automaker.
"It (the framework) provides the best chance ... of completing an out-of-court restructuring by securing a high level of acceptance among a diverse group of GM bondholders -- from mutual funds to pension funds to retail bondholders," the statement added.
The plan, which was presented to the autos task force and GM several weeks ago, "is one of several options on the table that seeks to achieve a successful out-of-court restructuring," the statement said.
GM bondholders face pressure under the terms of the automaker's bailout from the U.S. government to reduce by two-thirds the roughly $27 billion they are owed, through an exchange for new equity in a recapitalized company.
Bondholders have balked at those proposed terms, saying they are unfair given the payout terms being offered to workers represented by the United Auto Workers union and the remaining debt at GM.
The statement from bondholders came the same day task force adviser Steve Rattner was quoted in a Detroit Free Press newspaper interview as saying bondholders were being "quite difficult" in talks intended to cut GM financing costs.
Rattner also was quoted as saying the UAW had been "very constructive" in talks with GM and Chrysler over restructuring payments due union retiree healthcare trusts.
Rattner also told the newspaper that bankruptcy was not the task force's goal, saying it was "never a good outcome for any company, and it's never a first choice."
A representative from Treasury could not be reached for comment.
GM CEO Rick Wagoner was in Washington on Monday to meet with task force members, according to a person familiar with the meeting who was not authorized to speak publicly. The meeting was described as ongoing fact-finding by the panel.
Wagoner also met with the German Economy Minister Karl-Theodor zu Guttenberg on Monday night. Guttenberg told reporters after the talks that GM appeared willing to help Europeans in saving the automaker's Opel Unit.
Guttenberg, in Washington ahead of a meeting Tuesday with U.S. Treasury Secretary Timothy Geithner, said it was essential for GM to find a private investor. One scenario could involve GM taking a minority stake.
Guttenberg said there were still many open questions that needed to be addressed.
Germany is open to the possibility of helping Opel but has said it needed to be sure no state support would find its way to GM, which is seeking more bailout help from the U.S. government to survive. Opel has said it needs financial support to survive.
GM bondholders face pressure under the terms of the automaker's bailout from the U.S. government to reduce by two-thirds the roughly $27 billion they are owed, through an exchange for new equity in a recapitalized company.
GM and No. 3 U.S. automaker Chrysler LLC face a March 31 deadline when the autos task force must decide whether the companies can be restructured successfully.
GM has received $13.4 billion in emergency government loans and Chrysler has taken $4 billion so far. Both automakers have requested additional billions of additional dollars in loans to help them stave off bankruptcy.
The U.S. auto industry is suffering from its worst downturn in decades, with industrywide sales down more than 40 percent in February.
Statement from the advisors to the ad hoc committee of GM bondholders:
Several weeks ago we presented the President's auto task force and GM management with a framework for constructing a successful debt-to-equity exchange. The framework we proposed meets two important objectives. First, it is consistent with the government's restructuring requirements under the terms of the bridge loan. Second, it provides the best chance, given the parameters set forth in the plan, of completing an out-of-court restructuring by securing a high level of acceptance among a diverse group of GM bondholders – from mutual funds to pension funds to retail bondholders.
The framework we set forth is one of several options on the table that seeks to achieve a successful out-of-court restructuring, and we look forward to discussing the merits of any proposal that brings about the fundamental changes necessary to position GM for long-term success. We continue to believe that the best result for all stakeholders – and for the American economy – is a viable, competitive GM. We stand ready to do our part to bring about a workable solution.
As such, we are eager to continue our discussions with both GM and the auto task force.
