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Tuesday, 17 March 2009 14:09

GM Bondholders Present their Own Restructuring Plan

Advisers to GMs' bondholders said March 16 that they have presented a plan to the federal autos task force and to GM that provides GM's best chance for an out-of-court restructuring.

They 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.

Steven Rattner, chief adviser to the U.S. Treasury’s autos task force, spoke on behalf of the federal auto task force in an interview with the Detroit Free Press on March 16. Rattner said the administration is “open minded” about giving GM and Chrysler more aid and will use “all the resources” of the federal government to avoid bankruptcy for the automakers. Rattner is a former investment banker and a partner in the private investment firm Quadrangle Group as well as lead advisor and leader of the industry group.

U.S. auto suppliers may get some aid, and the task force plans to meet a March 31 deadline for assessing GM and Chrysler viability, said Rattner. The March 31 deadline is to submit realistic plans to return to profitability and make good on existing loans. GM needs to agree with bondholders to exchange $27.5 billion in debt for $9.2 billion in equity. Bondholders “are very effective in looking out for their own interests,” Rattner said.

“I hope all stakeholders will recognize the gravity of the situation and the need for everybody to engage in shared sacrifice,” Rattner added, speaking of bondholders. “But the government cannot solve all the problems of all the stakeholders in this situation.”

“We are open minded about committing additional resources to ensuring a viable domestic car industry. We will bring all the resources of the government to bear on these various stakeholders and try to reach a fair compromise, a set of compromises,” Rattner said. “Bankruptcy is not our goal, nor a desirable outcome.”

Rattner also said the following at various times during the March 16 Detroit Free Press interview:

* "We're not going to put [automakers] on some kind of indefinite intravenous drip feed of money."
* "We don't have to necessarily look at the government's money the way when I was a private equity guy I would have looked at private equity money.... It doesn't necessarily have to be an investment that Warren Buffet would make, but it has to be a prudent use of taxpayer money."
* "The supplier base is critical not only to the economy of Michigan and Ohio and neighboring states; it's certainly critical to the ability of the auto industry to function."
* "We want to be mindful of the fact that the government can't bail out every company in America that runs into some kind of problem."

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.


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